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Written by: Dr. Michael R. Muller - Director, Don Kasten
©2006 Rutgers, the State University of New Jersey
Table of Contents
INTRODUCTION ..............................................................................2 PRODUCTIVITY TOOLBOX ..............................................................5 Toolbox Introduction.....................................................................6 Productivity Metrics......................................................................9 Cost of Labor..............................................................................10 Space Optimization .......................................................................11 Productivity Questions...................................................................14 CONCEPTS FOR PRODUCTIVITY ENHANCEMENT, PART I INCREASING PIECES/PERSON/HOUR .............................................19 QUICK CHANGES......................................................................20 AR No. 1 Decrease Die Change-Out & Start-Up Times...................26 AR No. 2 Use Fixtures to Reduce Lathe Set-up Times....................32 AR No. 3 Install a Rotating Nozzle Carousel to Reduce Set-Up Times.34 AR No. 4 Employ Modular Jigs to Reduce Process Set-up Times.......36 BOTTLENECK MITIGATION.........................................................39 AR No. 5 Add Machine Operators to Reduce Production Bottleneck....41 AR No. 6 Install Refrigeration System to Cool Product...................45 AR No. 7 Replace Old Lathe With New Automatic Multi-station Tool..47 DEFECT REDUCTION .................................................................49 AR No. 8 Reduce Defects By Reducing Bottle Tipping...................53 AR No. 9 Develop Standard Procedures to Improve Internal Yields ....63 PREVENTIVE PREDICTIVE MAINTENANCE ....................................67 AR No. 10 Eliminate Shutdowns of Controls Due To Overheating ......69 AR No. 11 Begin a Predictive/Preventive Maintenance Program.........73 LABOR OPTIMIZATION...............................................................79 AR No. 12 Install Automated Glassware Packing Equipment.............81 AR No. 13 Install Magazines Between Machines to Reduce Costs.......87 AR No. 14 Cross-Train Existing Personnel to Avoid Lost Time .........90 CONCEPTS FOR PRODUCTIVITY ENHANCEMENT, PART II DECREASING COST/PIECE ..............................................................93 SCHEDULING ...........................................................................94 AR No. 15 Optimize Lot Sizes to Reduce Inventory Carrying Costs.....97 AR No. 16 Add a Second Production Shift..................................99 PURCHASING...........................................................................101 AR No. 17 Schedule Wood Chip Deliveries According to Demand......103 AR No. 18 Purchase Materials from Supplier in Customized Packing...105 AR No. 19 Install Pellet Silo and Receive Bulk Delivery Discount.......107 BURDEN ANALYSIS...................................................................109 AR No. 20 Condense Operation Into One Building ........................111 AR No. 21 Demolish Building to Reduce Tax & Insurance Fees.........114 INVENTORY .............................................................................117 AR No. 22 Eliminate Old Stock and Modify Inventory Control ..........120 FLOOR LAYOUT ........................................................................127 AR No. 23 Clear and Rent an Existing Warehouse.........................129 AR No. 24 Re-arrange Equipment Layout to Reduce Labor Costs.......131 AR No. 25 Re-arrange Equipment Layout to Reduce Handling Costs...134
Background As part of the Climatewise program, Professor Muller and other technical staff of the OIPEA have been involved with adding an energy and waste component to the PICOS supplier development program run by General Motors. As part of these activities, the GM people observed an IAC style assessment in New Jersey. Professor Muller then spent a week in Charlotte observing a PICOS assessment. During this information exchange it became clear that IAC assessments could be more effective if additional efforts were put into direct productivity issues. Recognizing that we have had training courses for center directors on energy and waste, it was concluded that an additional course should be assembled on productivity.
Evaluation of the GM PICOS™ Assessment Program The PICOS program is a long running industrial assessment service provided by GM for their suppliers based carefully on the Toyota Production System. The goal of the program is to improve the productivity of suppliers and pass the savings on to GM, which has a policy of continually paying less for a product each year. They are proud that they never tolerate price increases. The workshops, as they are called, use a team of normally two Supplier Development Engineers who are in the plant for 3.5 days. These are people with a variety of backgrounds and for the most part are not engineers. They make some suggestions themselves, but rely mostly on working groups of plant personnel to come up with cost saving ideas. Implementation of good ideas is expected to be immediate. Layout changes, for example, are often accomplished while the PICOS team is still there. Until recently, staff in the PICOS program did not concern themselves with waste or energy, but focused entirely on productivity issues. We can learn a great deal from the general approaches they use, but proprietary concerns will prohibit us from adopting any of their practices directly.
The goal of the training is to provide directors with several tools which they can apply directly. by showing the large impact of some of these recommendations. 3 . Additionally. but concentrate on a number of worked examples of various kinds of productivity recommendations.Goals and Extent of the training program We hope to provide some background material. it is hoped that director's themselves will be motivated to develop their own novel tools and fixes.
PRODUCTIVITY TOOLBOX 5 .
Cost Per Piece 5. Burden/overhead e. (Sales Price/Piece) minus (Cost/Piece) 4. Frequently if an action does one it also does the other. The principal metrics which are needed for ARs are: 1. Defect Reduction c. Overhead - 6. Usually these can be thought of as the costs or values of those things which go to make up Cost/Piece or Pieces/Person/Hour. Labor Costs Skilled union. Bottleneck Mitigation b. Cost of Inventory Carrying Cost Cost of Raw Material 3. Scheduling Whether defect reduction increases pieces/person/hour or decreases cost/piece is somewhat arbitrary. In our presentation we further break these categories down to help you identify the major concepts which allow the creation of Assessment Recommendations. Floor Layout c. Profit - 6 . Labor Optimization e. 2. Includes energy and waste.Toolbox Introduction The Toolbox is intended to supply you with a method of arriving at the necessary metrics which are required to write up and present Assessment Recommendations for Productivity. Cost of Space Warehouse Manufacturing Office (Overhead+Labor+Materials)Cost/Piece Cost of virtually everything besides direct raw material and direct labor. Preventive/Predictive Maintenance Decreases Cost/Piece a. unskilled non-union Also like to know Fringe Cost of Labor. Generally the type of productivity AR which can be recommended on a one day visit can be classified as something that Increases Pieces/Person/Hour or Decreases Cost/Piece. We hope you will find them possible to produce during a one day audit and that the manufacturer will find them sufficiently rewarding to implement. Increases Pieces/Person/Hour a. unskilled union Skilled non-union. Inventory d. Quick Changes d. Purchasing b.
Information in this section is used throughout the report when estimating material. will/should motivate the company to action. even if not exact. and other facts about their manufacturing organization that we have always requested before the performance of an Industrial Assessment. The information was provided by facility personnel or is based on regional averages. FINAL TRY 3. SECOND TRY 2. labor. This sheet has blanks for the information desired but contains (in parentheses) assumed values for many of the metrics which should be estimated for your part of the country. or productivity cost savings opportunities. The order of magnitude of the numbers should be correct under this approach and should "sell" the idea.. During the initial contact and follow up before the visit get company personnel to provide the numbers needed at the same time they are supplying energy consumption numbers. Use the PRODUCTIVITY METRICS sheet to make sure nothing is forgotten. sales figures. If the numbers were not all forthcoming before your arrival try to get company personnel to provide them during the opening interview. It will also allow the IAC to provide Productivity ARs which are reasonable and. If the necessary numbers are denied to you during this opening interview then present the PRODUCTIVITY METRICS sheet which is prepared before you ever enter the plant. We also recommend that you include these metric values and assumptions in the introductory section of your reports (similar to or along with Plant Background summary) so that all values used to make the productivity calculations are readily apparent to the manufacturer. FIRST TRY 1. but we think we can present an approach which both you and the manufacturer will find acceptable.At first glance you might conclude that these are proprietary numbers which a manufacturer may be unwilling to tell anyone outside (or even inside the company). An important task early in the assessment process is the estimation of 7 . Get the plant personnel to commit to the reasonableness of the numbers or if they find your numbers unacceptable to give an alternative value which you can use in your productivity enhancement ARs. Again have the PRODUCTIVITY METRICS sheet with you as you ask for the information. This approach allows the manufacturer to keep the information which he deems most private from appearing. number of employees.
Energy Direct Labor Waste Profit Materials Cost Overhead Cost per Part = Gross Sales / # of Pieces It is probably apparent that there are still some things such as Cost or Value of Inventory which can't be judged without knowing the cost per piece and how many pieces are in inventory. 8 . This is a critical step which will allow your team to focus on those areas which offer the most opportunities. Gathering the information on the PRODUCTIVITY METRICS sheet will allow this.the manufacturer’s relative costs of operation. so help from plant personnel will always be needed. Additional useful information for labor cost and the cost of space is given on the following pages. An example is shown in the pie chart below.
_____ . including 35% fringe) Fringe Rate: ______% (35%) Raw Material Costs: Yearly Usage Material/Resource Unit Price Water Treatment Water Usage: /hcf ($2.94/man-hour) (Items above in parentheses indicate total cost to the company.PRODUCTIVITY METRICS SHEET Labor Costs: Type of Labor Production Worker: Skilled Technician: Engineering (contracted): Engineering (in-house): Actual ________/hr ________/hr ________/hr ________/hr Assumed ($19. _____ ) Profit Margin: Cost per Piece to Produce: _____% (100%) _____% (10%) $______/piece Inventory and Floor space: Value of Floor space: Inventory Carrying Cost: Raw Material Inventory: Work-In-Progress Inventory: Finished Goods Inventory: Quantity = ______ Quantity = ______ Quantity = ______ _______/ft2/yr ($5.96/man-hour) ($100/engineer-hour) ($38.00/ft2/yr) _____% (15%) Value = ______ Value = ______ Value = ______ 9 .47/man-hour) ($25. _____ .50/hcf. 1 hcf = 100 ft 3) Production Information: Overhead: ( includes _____ .
40 $259.35 $30.60 $314. Master Mechanics Glaziers Lathers Marble Setters Millwrights Painters.00 $215.90 $40.25 $36.60 $327.15 $328.35 $27.50 $19.80 $187.50 $24.60 $212.95 $23.60 $186. Oilers Equipment Operators.25 $27.00 $290.20 $342.80 $297.20 $152.. Structural Steel Paper Hangers Pile Drivers Plasterers Plaster Helpers Plumbers Rodmen (Reinforcing) Roofers.40 $156.45 $31.40 $211.55 $41.20 $194.Table 1: Cost of Labor 1 Basic Rate Incl.40 $172.30 $32.75 $25.50 $36.80 $258..20 $213.40 $385.S. Tile and Slate Roofer Helpers.55 $21.40 $186.80 $249.60 $180.00 $326.80 $122.60 $306.00 $26.00 $357. Heavy Welders.70 $26.15 $26.20 $36.30 $48. Fringes Hourly Daily $24.20 $343.35 $28.40 $189.20 $166.95 $44.00 over trade) Common Building Laborers Asbestos Workers Boilermakers Bricklayers Bricklayer Helpers Carpenters Cement Finishers Electricians Equipment Operators.00 $207.60 $38. Light Equip.40 $24.00 $154.05 $47.60 $335.75 $32. Composition Roofers.00 $50. Means Co.75 $39..80 $177.00 $19.70 $26.60 $212.95 $23.15 $42.00 $289.60 $254.20 $224.25 $19.60 $243.40 $158.65 $19.85 $32.00 $197.60 $293. Light Truck Drivers.65 $42.00 $190.75 $40.75 $28.45 $44.35 $40.00 $258.50 $25.60 $355.20 $357. Medium Equip.40 $21.55 $33.70 $24.35 $50.20 $172.40 $19. outside ($2.00 $404.20 $40.05 $37.80 $201.80 $305.95 $44.20 $39.30 $41. Structural Steel Wrecking Rate w/ Overhead and Profit Hourly Daily $41.80 $356.60 $15.80 $242.80 $310.85 $38. Composition Sheet Metal Workers Sprinkler Installers Steamfitters or Pipe Fitters Stone Masons Structural Steel Workers Tile Layers (Floor) Tile Layer Helpers Truck Drivers.00 $312.55 $19. Ordinary Painters.40 $332.65 $25.80 $23.00 $192.30 $24.20 $326.80 $218.40 $23.20 $322.40 $20.20 $191.40 $382.40 $388.85 $44.40 $300.10 $22.20 $23. Crane or Shovel Equipment Operators.30 $19. R.00 $203.50 $37.95 $38.00 $155.80 $179.80 $404.80 $226. Equipment Operators. inside ($0.20 1Means Repair & Remodeling Cost Data.80 $320.00 $44.65 $18.60 $184. Equipment Operators.65 $44.50 $23.00 $220. Inc.90 $28.60 $356.55 $48.20 $157.10 $31.60 $39.50 over trade) Foreman Avg.60 $197. 10 .00 $226.10 $22.20 $148.60 $25.10 $37.30 $26.45 $32.40 $197.40 $196.20 $41.60 $352.80 $23.40 $328.95 $30.60 $256.80 $313.00 Trade Skilled Workers Average (35 Trades) Helpers Average (5 Trades) Foreman Avg.40 $266.00 $303.65 $40.35 $23.00 $152. 15th Edition.40 $223.30 $27.20 $200.05 $24.
A result is that the operations are expanded into all available space in an unoptimized manner. Tables 2 and 3 can be used to estimate cost benefits for space related opportunities. unused buildings are allowed to deteriorate and diminish in value. Some companies who own the space they occupy do not view it as having significant value. Four basic options can be explored in an effort to improve the return from presently unoptimized space: • Optimize existing floor layout and: lease excess space to outside interests (see AR#24) reduce leased space requirements (see AR#21) avoid new construction for future expansions • Demolish dilapidated space to reduce tax and insurance expenses (see AR#22) Examples of cost savings calculations for the above opportunities are included in this manual in the noted AR write-ups. 11 . and reduced transportation costs (if traveling between two sites can be eliminated by consolidating operations). In addition to the quantities listed in the tables.Space Optimization The value of space is an important resource that is sometimes overlooked in manufacturing facilities visited by the IACs. Potentially valuable floor space is used for equipment graveyards or storage of outdated products. and dilapidated buildings are left standing (resulting in higher tax and insurance costs).). HVAC. other possible savings opportunities which should be considered include: reduced or avoided operating costs for the space (lighting. etc.
00 $5.75-4.20-4.00 $14.00 $35.00 $3.00-26.00 $58.00 $30.00-28.00-34.50 $2. 21996 Comparative Statistics of Industrial and Office Real Estate Markets.15-3.75-4.00 $57.00 $2.000-60.00 $25.000 sf 20.00-45.25 $2.25 $23.00-30.00 $20.00-60.50 $2.000 sf 20.C.00 $3.00 $25.50-17.75-4.40 $4.00 $21.50-3.Table 2: Value of Space 2 Sale Prices ($/ft 2 ) Lease Prices ($/ft 2 /yr) Central Central Vacancy City Suburban City Suburban Indicators $22.00 n/a n/a n/a $30.00-4.000 sf 60.00 $5.50-4.000 sf and up 0 to 20.000 sf 60.25 n/a n/a n/a $3.00-30.50 $2.75-4.00 $2.00 $39.40 $4.00 $22.00-21.60 $3.00-45.50 $3.50-6.00-35.50 $2.75 $3.50-3.25-3.000-60.60 $3.000 sf 20.00-37.000 sf 60.00 $35.00 $26.90-3.00 $3.00-21.00 $42.00-3. Society of Industrial and Office REALTORS and Laudauer Associates Inc.000 sf and up Boston Chicago Dallas Denver Los Angeles New York Orlando Phoenix Washington D.00 $30.00 $37.000 sf and up 0 to 20.00-41.00 $35.50 $3.00-32.00 $3.25-2.25-5.90-3.00 $5.00-27.75-6.00-70.00-22.00 $39.00-80.00 $33.000-60.00 $20.00 $17.000-60.00 $25.000 sf 60.00-35.00-55.16-5.75-4.00-21.00-40.000 sf and up 0 to 20.00-6.50 $3.000 sf 20.75 $3. phone(202) 737-1150 12 .25 $12.000 sf 60.00 $45.25-5.00 $30.00 $2.000-60.65 $3.75 $4.25 $2.00 $25.25-3.000 sf and up 0 to 20.00-24.00-4.75-3.000 sf 60.80-3.00-18.00 $20.90 $3.50 $2.00-4.25 $3.00-60.00-40.000 sf 20.00 $35.75-4.000 sf 60.00 n/a n/a n/a $30.000 sf and up 0 to 20.000 sf 20.00-35.00-50.00 $23.00-53.00-45.00-5.50-26.00-50.000 sf 20.00-2.00 $23.50-3.25 $4.00-37.000-60.50-4.00 $32.000 sf 20.50 $2.00-40.00 $3.00 $17.00-23.000-60.50-4.00 $25.000-60.000 sf and up 0 to 20.25-3.00-9..50 Moderate shortage Moderate shortage Moderate shortage Moderate shortage Balanced market Substantial shortage Moderate shortage Moderate shortage Substantial shortage Moderate shortage Moderate shortage Substantial shortage Substantial shortage Moderate shortage Moderate shortage Moderate shortage Moderate shortage Moderate shortage Moderate shortage Balanced market Moderate oversupply Substantial shortage Substantial shortage Substantial shortage Moderate shortage Moderate shortage Balanced market Balanced market Moderate shortage Moderate shortage Location Atlanta Size 0 to 20.60 n/a n/a n/a $3.00 $3.80 $4.50 $27.50 $3.000 sf and up 0 to 20.000-60.00-40.00-60.00-6.00 $40.50 n/a n/a n/a $3.25-3.00-48.90-3.00 $36.00-35.000 sf 60.75 $4.00 $48.00 $25.60-3.50 $3.25 $3.00 $20.50-4.00-28.00 $2.00-7.00-50.00-52.75-4.15-3.50 $3.00-30.000 sf 60.00-38.00 $21.95-4.25-5.00-35.75-6.25-4.000 sf 60.00 $20.00 $3.00 $30.000-60.00 $3.52-7.000 sf 20.50-3.00-24.40 $4.60 $3.00 $2.00-27.60-3.00 n/a n/a n/a $27.00 $25.30-4.00-63.000 sf 20.000 sf and up 0 to 20.00 $62.00 $4.00 $30.00 $25.00-43.00 $2.00-29.000 sf and up 0 to 20.
45 $1.40 $2.75 $0.30 $0.35 n/a $0. Society of Industrial and Office REALTORS and Laudauer Associates Inc.15 $0.03 $0.10 $0.14 $0. Cost $0.93 $0.61 $0.15 $0.85 $0.15 $0.50 $0.20 $0.05 $0.10 $0.12 $0.60 $0.10 $0.20 $0.08 $0.15 $0.30 $0.07 $0.03 $0.84 $1.25 $0.60 $1.C.55 $0.10 $0.15 $0.20 $0.87 $1..10 $0.25 $0.10 $0.50 $3. Maint.36 $0.15 $1.12 $0.21 $0.50 $0. D.75 $1.25 $0.35 $0.16 $3.35 $0.23 $0.08 n/a $0.15 $0.00 $0.03 $2.15 $0.30 31996 Comparative Statistics of Industrial and Office Real Estate Markets.80 $1.93 $1. Region Central City Suburban Central City Suburban Central City Suburban Central City Suburban Central City Suburban Central City Suburban Central City Suburban Central City Suburban Central City Suburban Central City Suburban ($/ft 2 /yr) Real Insurance Structural Common Estate (Fire and & Roof Area Total Taxes Liability) Maint. phone(202) 737-1150 13 .12 $0.25 $0.35 $0.70 $0.08 $0.60 $0.20 $0.41 n/a $0.99 n/a $0.23 $0.88 $1.08 $0.10 $0.10 $0.15 n/a $0.07 $1.20 $0.35 $1.50 $0.40 $1.25 $0.78 $2.10 $0.48 $0.10 $0.55 $0.33 $1.20 $0.85 $0.07 $0.35 $1.07 $0.05 $0.Table 3: Cost of Maintaining Space 3 Location Atlanta Boston Chicago Dallas Denver Los Angeles New York Orlando Phoenix Washington.10 $0.75 $1.75 $1.10 $0.
e. lost production time.)? •What causes each type of defect? •Are in-process and/or finished goods inventories built up due to potential defect problems in the production process (to ensure that the customer gets the products on time)? If so. General •If you can make more product. regrind-etc. purchased components. The question list should accompany you to the plant and be used as reminders both in the sense of what to look for and what information to seek to complete an AR. finished goods)? •What is the lead time of the product/process? ("product" could also be object for the next operation) Increasing Pieces/Person/Hour Bottleneck Mitigation •How has the operation changed over time? (product. equipment. can you sell it? •Do you ever run overtime to meet production goals or compensate for defective batches? (related costs) •Do you have any plans for expansion? •Average value and quantity of each type of inventory (raw materials. extra equipment or processes--i. material.Productivity Questions One more useful component of the Toolbox is a set of questions which can be asked (where they are applicable) to determine the likelihood of producing particular Productivity Enhancement ARs.. procedure) •What is the optimal rate of this process/procedure? •Why is this process/procedure the bottleneck? Defect Reduction •What percentage of products are inspected? •In what stages/locations of the process do the most rejects (or clean-up) occur? •What are the most common types of defects? •How much does each type of defect or clean-up cost per year (labor. in-process products. what percent of existing inventory is considered excess? What is the value and quantity of overstocked goods in inventory? •Do standardized procedures exist for the processes where defects most often occur? •Does one machine operator produce significantly fewer defects than others? 14 .
(If so.) Quick Changes •How much time does it typically take to setup XYZ machine? •Do you need to do any adjustment to the machine? •Do you need to use any gauges or other measurement devices to adjust the machine? •How many different tools do you need for the setup of XYZ machine? •Can the setup be performed by the operator or is a specialist needed? •Do you need a period of time when you run pieces which are used just to get rid of initial problems? •Do you need to idle the machine for a while to bring it up to speed or to a proper temperature? •How do you clamp pieces to the machine? Do you use the same fasteners in all the cases? Labor Optimization •What percentage of the cost of production is labor? Direct / Indirect? •What is the pay scale? •What is the pay rate premium for late shifts? •Do you run overtime due to the lack of skilled personnel? •What is the cost of overtime? •Is this a union shop? •Do you ever work overtime to meet production goals? Why? •Are you lacking labor in a particular skill? •Are you keeping up with preventative maintenance? Preventive/Predictive Maintenance •Are there shutdowns of the production process? •Are these shutdowns unscheduled? •What are the duration and frequencies of these shutdowns? •What are the reasons for the unscheduled stoppages? •What is the cost/hour of production downtime? 15 . that operator’s expertise should be used to develop standardized operating procedures for training less effective personnel.
number of shifts.? If the answer is YES. 16 . What would be the right sequencing to eliminate these operations? •Do you have large size batch operations? •What is the company's operating schedule (including vacations. it may be economical to scrap junk and use the freed space. or demolish dilapidated facilities) Scheduling •Do you have operations where different sequencing of jobs would eliminate some non-value added operations. identify these operations. such as cleaning. setups etc.Decreasing Cost/Piece Purchasing •How often are raw material deliveries received? •Are raw materials delivered based on the supplier’s convenience or planned needs at your facility? •How long do raw materials or purchased components remain at your facility before they are used? Floor Layout •Do you rent. lease or own the facility (or another)? (cost $/ft2 /yr) •How do you account for the cost (or value) of space? (cost $/ft2 /yr) •How many different products do you make? Inventory •How much floor space is used for each type of inventory? What is the assigned value (if any) of that floor space ($/ft2/yr)? •If it is determined that there is excess inventory of some type. overtime)? •Ask questions about ratio indicators. why is that excess inventory needed? Burden •Is new construction planned? How much and why? •Do you manufacture or store goods in any other building nearby? •Would you be able or want to have a rent paying tenant occupying any portion of your building complex? •Do you place any value on equipment or facilities which seem to be "junk"? (If not.
•Identify processes or operations which you feel are more costly than they should be. Second ratio is speed of the process (rate of production) to sales rate. why? •Do you experience multiple handling or multiple inspection? 17 . •Do you use push or pull system in your manufacturing process? •If overhead cost is too high.First ratio is production lead time to actual value added time to manufacture a part. Third ratio is number of pieces to number of work stations or operators in a line segment.
CONCEPTS FOR PRODUCTIVITY ENHANCEMENT PART I Increasing Pieces/Person/Hour 19 .
Keeping setup changes out of the hands of the machine operators merely creates a class of setup experts. although the estimated reductions might be less than if an extended investigation was conducted. The second step is to convert as many internal tasks as possible into external. EXAMPLES OF HIGHER EFFICIENCY Preheating new dies for molding operations can be used as one example. it is critical to minimize their duration. Internal setup is the time used for setup while the process cannot continue. Storage areas could use waste heat from the molding operation and thus eliminate the necessity of running the cold press and producing unwanted parts which have to be reground and processed again later. Even during a one day assessment it is possible to discover great opportunities for time savings during setups. In order to determine how to shift internal setups into external setups. External setup time is the time used to prepare machines and tooling for the next operation without stopping the process. Since internal set-up tasks require a break in production. Since production continues making useful goods in the meantime. it is not as essential as with the internal setups to cut down the time required for the external setups. Changing from internal to external setup usually cuts time by 30% to 50%. One point should be brought to attention.Quick Changes Introduction The preparation of any machine to perform a specific task or operation is called setup time. 20 . It is possible to divide the setup tasks into two groups: internal and external. From the previous statements it is obvious that shortening of the internal setup time has much higher priority. Even additional heaters might be justified if the energy cost for preheating the molds is lower than the cost of imperfect runs). The third step involves the streamlining of all setups. thus cutting their time. Operators must be involved--external setup does not mean a different location or different people. one must study the shop floor conditions in great detail. The first step is to identify internal and external setup tasks. (Of course preheating can also be achieved using a source of heat other than waste heat. Informal discussions with the workers and observation of the process often suffices.
the valve is opened and the air from the mold will rush into the cylinder.Vacuum molding needs an almost complete vacuum. Another example could be standardizing the height of die. same size bolts should be used for all dies. Use of the same length bolts is a bonus. 21 . Then. after preparing the mold. thus the operator doesn't have to change tools. Also. During the molding operation vacuumize the tank. die A Standardizing Shim at Clamping Height 80 50 30 die B 320 30 80 50 Clamp Height Standardization Clamp Height Standardization Die Height Standardization Shim for Standardizing Die Height Positioning of a jig on a table by trial and error adjustment can be virtually eliminated by machining center holes and corresponding pins. To achieve that using a vacuum pump takes quite some time. The adjustment of the height is tedious and time consuming and very critical for the proper operation of the press. welding of supporting legs can eliminate press shut height adjustment and enables the operator to use the same length bolts for clamping. If one is higher than the other. The major benefit is the same shut height of the press. The volume of the cylinder should be about 1000 times that of the mold cavity. though. A quicker method of creating the vacuum in the mold is to attach a cylinder to the mold using tubing with a valve. but this time the operation will take fraction of the original time. The process is finished with the vacuum pump to achieve complete vacuum.
especially getting it through a length of a bolt that is too long and doesn't help in any way in attaching.Attachment Plate die (set to h2/2 + Θ = K) h2/2 Θ X Y Jig for Adjusting Thickness centering jig on attachment plate (female) centering jig on machine (male) Centering Jigs One-turn clamping is a way to fasten and unfasten a piece using a single turn. One should not be required to turn the nut all the way out of the thread of the screw. Use of U-shaped washers could also be implemented. clamp The Clamp Method 22 . Pear shaped holes for fasteners are another option.
In other words. The capacities of machines vary as well. In some cases the disparity among machines cannot be eliminated. but by time spent waiting for the processing of one lot to be completed before another lot can be processed.) This can be accomplished by standardizing both processing quantities and processing times. Then the goal should be at least not to produce more than necessary. If the waiting periods could be eliminated.clamping holes Fasten Here Attach and Remove Here Pear-Shaped Holes for Clamping by Turning Other great delays in production are caused not by inspection or transportation. the highest output machine should not automatically be the targeted pace (meaning that there normally would be an effort to bring the capacity of slow machines up by parallel processing or other productivity 23 . common reductions are as much as two fifths. This is because different machines perform various operations and do not take the same times. production time could be cut. Standardizing processing quantities can be achieved fairly easily. the real problem lies in standardizing processing times. (Based on available data.
The quantities produced should be the quantities needed. In some cases the answers given will immediately alert the auditor and call for his attention. it is found that inventory is excessive and setup times rather long. it should be automatic when part are pressed together (using pins. The goal is not to overproduce because if something goes wrong all pieces in stock (or manufactured in the previous operation and waiting for the next machine) are wasted.) Questions to Ask The auditor should always ask questions pertaining to setup times and practices. If. Asking how much time setups take is an obvious one. Principles • Adjustment cannot depend on feeling or experience • Functional clamps should be used over screws • If screws are necessary. cams. that while machines can be idle. the time involved can be. one remedy is to build up inventory. It is important to bear in mind.improvements). however. workers must not be because the cost of manpower is generally far higher than the cost of amortizing machines. The result could be that the fast machine has to wait. the reduction of a setup time should enable the reduction of inventory. etc. frequent setups are necessary to produce a great variety products. design them in such a way that one turn will fasten and unfasten the fixture • Dovetail connectors. but the pace is set based on actual needs. The major difficulty in the production of relatively small quantity lots of any product is either the number of setup operations or the length of time it takes to perform them. The auditor should ask 24 . pins. Even if the number of setup operations cannot be reduced. There is no absolute value for a proper setup time--an engineering judgment must be used. that is external setup application • Movements should be combined or linked together • Parallel operations should be conducted • Setups should produce defect free products from the very beginning of the run • Quick connect and disconnect • Centering adjustments should not have to be made. wedges should be used • Intermediary jigs should be used. after objective evaluation. However. When demand calls for high diversity and low volume.
a possible reason to consider is that the machine is waiting for a trained personnel to do the setup. it seems that the pictures and concepts are at least as helpful as the case studies. there could be a variety of reasons for an idle machine. If during the plant tour one notices idle machines. Inventory build-up is one definite consequence of long setup times (among possible other reasons).questions which will give him answers as to whether the practices listed in the PRINCIPLES paragraph are used. Related ARs Two ARs are included under this category. Long lead times indicate large lot sizes and the reason for large lot sizes is most likely long setup times. • DECREASE CHANGE OF DIES & START-UP TIMES • USE FIXTURES TO REDUCE LATHE SET-UP TIMES • INSTALL A ROTATING NOZZLE CAROUSEL TO REDUCE SET-UP TIMES • EMPLOY MODULAR JIGS TO REDUCE PROCESS SET-UP TIMES 25 . Of course. If not. However. • How much time does it typically take to setup XYZ machine? • Do you need to do any adjustment to the machine? • Do you need to use any gauges or other measurement devices to adjust the machine? • How many different tools do you need for the setup of XYZ machine? • Can the setup be performed by the operator or a specialist is need? • Do you need a period of time when you run pieces which are used just to get rid of initial problems? • Do you need to idle the machine for a while to bring it up to speed or to a proper temperature? • How do you clamp pieces to the machine? Do you use the same fasteners in all the cases? Symptoms/Indicators One of the most revealing indicators is excessive inventory. a great opportunity may present itself at once.
operations which can be performed while the machine is running The first step to reducing set-up times should be to shift as many operations as possible into the external set-up mode. Further.Assessment Recommendation No. While this may not reduce the total time spent performing and preparing for the set-up.000 Simple Payback Period = 1. A solution to this problem is to deliver all needed tools to the machine PRIOR to shut down.040. Documented results across a wide variety of industries indicate that set-up times are commonly reduced by as much as 95% once reducing set-up times is identified as a priority and quick-change strategies are implemented. 1985. long set-up times are not always necessary and should be avoided--especially when set-ups must occur frequently.4 4 Shigeo Shingo. "A Revolution in Manufacturing: The SMED System". 1 Decrease Die Change-Out & Start-Up Times Assessment Recommendation Summary Estimated Cost Savings = $1. For example.operations which can be performed only when the machine is shut down (or at least not producing useful products) external setup -. 113 26 . it is a common mistake for a technician to waste valuable time by retrieving tools after the production line has been shut down. the tools should be organized so the technician knows exactly where each tool is located and no time is wasted searching for misplaced tools.820. however.000/ year Estimated Implementation Cost = $3. Productivity Press. it WILL reduce the amount of time that the production equipment is offline. p. Frequent set-ups are necessary to produce a great variety of different products. and ii) the length of time it takes to perform each set-up. The setup procedure can be divided into two operations: internal setup -.7 years (about 20 months) General Two major difficulties in the production of relatively small quantity lots of any product are: i) the number of production line changes (“set-ups”) required.
referred to as “start-up. brings in new dies and mounts them into the individual molding stations. no adjustments are made until the following morning and that night’s production hours are wasted. Recommended Actions Reduce die change-out and start-up times by implementing the following: • Utilize the knowledge of your most experienced technicians to develop standardized procedures for all phases of change-out and start-up -. Production personnel stated that there are “many different paths to the same point. This second stage of the set-up procedure. there are 60 production changes per month.” may take from 4 hours to 3 days. Next. the 24-hour period available in one day is not fully utilized. and mold alignments. mechanical timings. Although there are “many different paths to the same point. These procedures typically take anywhere from 1 to 4 hours. each technician goes about these adjustments in his own way and experience plays a large role in the speed of the adjustment process. the timing of the piston pushing the gob out of the fore-hearth is changed.This should include a sequence of start-up adjustments. depending on whether just the molds need to be changed or whether the process also needs to be changed. Since minimal written standardized procedures presently exist. cooling air flows. if a “start-up” procedure is still in process when the first shift set-up team leaves. consisting of 8 specialized technicians. from the time the previous run is shut down until glassware of acceptable standards is obtained for the new product. The average set-up time was said to be about 20 hours. Most of these operations are presently carried out sequentially. The second stage of the set-up process involves the fine tuning of the glass temperatures.” establishing a standard set of guidelines about which path to take will reduce guesswork and the associated costly time delays. The set-up team. Hence. 27 . Since there is only one team capable of making the changes. the shoots leading to the individual dies are replaced.Existing Practice and Observation The following description is based on our conversations with experienced staff and not actual observation of a procedure because during our visit a change of dies on the production line was not performed. On average.” meaning that each technician may use a different path but they are all experienced enough to eventually obtain the desired results. and the intervals in between the shears' cuts are synchronized to produce the proper sized gobs.
28 . Based on the large potential cost savings. Several of the suggestions above are already under investigation by plant personnel.This will save time presently used searching for tools • Deliver all jigs. Based on the recommendations.This will allow quicker temperature adjustments and better control. we will consider saving only one fifth of the existing set-up time. to the machine prior to shutting down the production line -. Anticipated Savings Since the savings mentioned in the General section (a 95% set-up time reduction) seem too aggressive and also because they are based on sometimes time-consuming analyses of the setup operations. • Install Temperature Sensors -. dies. These actions cannot presently be performed simultaneously. including the development of standard procedures. • Install Strain Gauges -.• Design a tool kit which will hold all change-out tools in an organized manner and deliver the kit to the machine prior to shutting down the production line -. the quickest possible implementation is recommended. etc.This will allow quicker mold alignments.This will reduce guesswork when responding to problems • Purchase and install two-level platforms -.This will save time during the change-out phase by allowing technicians to work on the upper level adjustments at the same time other technicians are performing mold change-outs and other lower level adjustments. Being conservative. our recommendation is based on estimates made by experienced staff at your company.This will minimize production line down-time which is presently used for retrieving these items • Develop a troubleshooting guide describing common start-up problems and their fixes -. this number was considered reasonable by the production manager.
it was determined that it costs $5. VST.06/hr) .600 hrs/yr) GSH = $647 / hr per production line It is assumed that during set-up time.32/hr) VST = $631.400 hrs/yr)] = ($45./yr)(20 hr/chg)] = ($45.000/yr) / (69.000. Facing America's Trash: What Next for Municipal Solid Waste The calculation assumes that the saved labor time is put to productive use in other areas of the facility.($5. 5 6 Office of Technology Assessment.06/hr per production line CES = Cullet Energy Savings. $5.Setup Times for All Lines) = ($45. based on a labor rate of $25. GSH. The value of raw materials added to the furnace for each production line is $10.06/hr.96/hr.000.000. molten gobs of glass are dripped into the basement and are later crushed and used as cullet. $10.The gross sales per processing hour.)(12 mon. no additional raw material costs will be incurred for a production line as a result of the set-up period because the gobs will be recycled and added to the furnace as cullet.000/yr)/[(10 lines)(8400)hrs/yr . To be conservative.000 hrs/yr) .(60 chg/mon.200 Btu/lb less heat to melt cullet than it does to make glass from virgin raw materials. Even with all labor savings neglected.32/hr less to re-melt the cullet which is collected during the set-up period as compared to virgin raw materials. The following calculation is an estimate of labor saved by performing this recommendation6. 29 . 1989. can be obtained as follows: GSH = Gross Sales / (Annual Operating Hours for All Lines . these cost savings have been omitted from our annual cost benefit estimates.CES where CMS = Cullet Material Savings.32/hr per production line Thus. it takes 1.(14.5 The value of the saved production time. From this value. In addition.($10. assuming that the time lost could have been used to produce salable products. VST = ($647/hr) .62/hr per production line ≈ $632/hr per production line We estimate the value of saved production time as $632/hr per production line. is estimated as: VST = GSH .CMS . the potential cost benefit is substantial. however.000/yr) / [(84. Hence.
The labor involved is estimated at 4 weeks of work for each furnace. including installation.60 x 106 / year By reducing the present set-up periods by an average of 4 hours each.72 / setup) Wages Saved per Year = $0.. the annual cost benefit.Time Saved per Setup = 0. would be: Annual Cost Benefit = (Production Time Saved) x (Value of Saved Production Time) ACB = [(60 chg/month) x (12 month/yr) x (4 hr/chg)] x [$632/hr] ACB = $1. Strain Gauge Costs = ($35.96/hr) x (4 hr) = $103.000/platform) = $50. Hence.96/hr. Wages Saved per Year = (60 chg/month) x (12 month/yr) x ($830. Based on a quote already obtained by facility personnel..73 x 10 6 3) ten two-level platforms. Platform Costs = (10 platforms) x ($5. x (40 hr/wk) x (8 people) x (3 furnaces) Labor Costs = $99.96/hr) x (4 wk/person/furnace) x . for 8 people working 8 hour days at a labor rate $25.686 2) The purchase and installation of jigs and strain gauges for all 78 production dies.84 / setup per person) = $830. ACB. Labor Costs = ($25.82 x10 6 / year Implementation The estimated costs for the specific recommendations listed previously include: 1) Labor for equipment installation and preparation of setup tooling and standard procedures.72 / setup Hence.84 / setup per person Wages Saved per Setup = (8 people) x ($103.000 per die) x (78 dies) Strain Gauge Costs = $2.. .000 4) temperature sensors (3 per fore-hearth) 30 ..20 x 20 hr = 4 hrs Wages Saved = ($25.000. Hence. the cost of the required six strain gauges per die is $35.
The estimate is based on the price for an infrared temperature sensor capable of reading temperatures up to 3000 ˚F. the estimated cost savings are considered reasonable.000 + $165. 31 ..04 x 106) / ($1.500 a piece. the combined estimated implementation cost is: Imp.04 x 106 The simple payback period can be calculated from the following equation: Payback Period = (Implementation Cost) / ES = ($3.686 = $3. Cost = $2.500/sensor) Sensor Costs = $165. and conversations with plant personnel. Sensor Costs = (3 sensors/fore-hearth) x (10 fore hearths) x . x ($5. the present lengthy set-up times at your facility. we hope that the above example will reinforce your present efforts to reduce set-up times and serve to focus your attention on this critical part of your operations. The sensors cost $5.. Cost = Strain Gauge Costs + Platform Costs + Sensor Costs + Labor Costs Imp. However.7 years (about 20 months) Conclusion: It is important to realize the potential in implementing this recommendation.000 + $99.73 x 106 + $50. . based on case histories from other facilities.000 Finally. It is assumed that 3 sensors per fore-hearth will be installed. We do not pretend to have thorough enough knowledge of your existing procedures to be able to specify the definite steps which are needed in order to achieve the indicated savings or an accurate implementations cost... Due to the large savings potential.82 x10 6 /yr) Payback Period = 1.
While the machine is running the bits are mounted into a holder and still adjusted using a variety of gauges. That was one of the most time consuming adjustments. There are more models if software variations (therefore more programming options) are considered as well. Since it was a single purpose lathe machine the opportunity to convert internal setup into external setup was obvious. The company offers four different models of washing machines in terms of hardware. The change now encompasses the switching of a holder instead of the individual bits. the cutting bits were changed inside the machine and because of close tolerances required.08 years (about 1 month) Background The company makes washing machines which are sold around the world. Existing Practice and Observation A four-spindle lathe is used to machine the diameter of shafts used for the revolving blades in washing machines.Assessment Recommendation No. The company sales are $70. Recommended Action Make fixtures for holding the lathe cutting bits. Perform the bit alignment while the machine is running and have the fixture ready for a swap when needed.000/year Estimated Implementation Cost = $29. but the whole process became an external setup not taking time from production. A delicate adjustment needed to be made for the lathe cutting bits. The production of the washing machines is at approximately one machine every ten minutes. 2 Use Fixtures to Reduce Lathe Set-up Times Assessment Recommendation Summary Estimated Cost Savings = $378.000. It is recommended that in the new process the bits are held in a holder which is mounted precisely in a predetermined position on the lathe machine. as is generally the case when gauges are employed.180 Simple Payback Period = 0. Before the improvement program began. 32 .000. a number of gauges had to be employed.
4 (fringe benefits) x (1 week) x (40 hr/week) x 3 (people) = $6.720/per fixture Implementation Cost = (575 + 6 720) x 4 = $29.180) / (378.5/piece) x (15 min .00/hr) x 1.08 years = (approximately 1 month) 33 .00/hr Time to Manufacture = 1 week People Involved = 3 Number of Fixtures Needed = 4 Labor = ($40.Anticipated Savings Material = $575/fixture Labor involved represents the manufacture of the fixtures.000) = 0. Average Number of Setup Changes per Month = 30 ES = (# of pieces/hr) x (value of a piece) x (original time .new time) x (# of setups/year) ES = (200 pieces/hr) x ($31.5 min) x (1/60 hr/min) x 30 x 12 = $378 000/year ES = $378 000/year In this case the savings represent lost production on the machine. Implementation Labor Rate = $40.180 Simple Payback = (29.
Recommended Action The fix of the problem consisted of rotary mounting hardware making it adaptable to different types of pump cylinders. One pump assembly can have up to six different head arrangements. The change and position adjustment takes a skilled operator about five minutes.Assessment Recommendation No. all the hydraulically actuated diaphragm pump arrangements share the basic idea of an intermediate fluid which has to be filled into the cylinder of a pump at a certain position as the pump proceeds on the line. Existing Practice and Observation The filling of the cylinder cavity is performed with nozzles which are positioned above the filling hole in the cylinder. 34 . The production rate is about fifteen pumps an hour. After the nozzle is properly adjusted it automatically fills the pump cavity. For all that time the pump assembly line is shut down. The company sales are $85. The pump models differ by size.000. the rotation is initiated by a switch which positions the multiple rotating carousel with different nozzle location into the proper place. The rotation takes a couple of seconds. the nozzle has to be changed and repositioned every time there is a change of a pump size. Since the existing nozzles were utilized in the design of the rotating fixture. However. which are mounted on a single gearbox. As stated above.200 Simple Payback Period = less than one month Background The company makes metering pumps predominantly for the American market. The pumps are hydraulically actuated tubular diaphragm type. the manual change and adjustment of the nozzles before the next type of a pump started being produced was eliminated.200 per fixture.000. even though the filling of the intermediate fluid was automatic when the production line was running. After the change. the expenses were minimal amounting to approximately $1. As a result of this improvement. 3 Install a Rotating Nozzle Carousel to Reduce Set-up Times Assessment Recommendation Summary Estimated Cost Savings = $60.750 / year Estimated Implementation Cost = $4. Since the cylinder sizes differ. the line had to be stopped for five minutes for the manual adjustment before the run could resume.
$1800 of expenses have to be added to the cost of the project.750/year In this case the savings represent lost production on the line.200) / ($60.5 minutes) x (1/60 hr/min) x 10 x 12 ES = $60. We have assumed that the only costs which will increase due to increased pump production are the raw material costs.Anticipated Savings Material and Labor for the New Nozzle Carousel = $1. The cost estimate obtained from the nozzle manufacturer was $300 a piece.07 years (less than 1 month) 35 .750/yr) Payback Period = 0. Implementation Implementation requires the manufacture and installation of the nozzle carousel ($1. Since 6 extra nozzles were needed.$500/piece) x (4. The simple payback period can be calculated from the following equation: Payback Period = (Implementation Cost) / ES = ($4. Energy cost increases are assumed to be negligible. and gross labor costs will remain unchanged because the laborers who are presently waiting during the changes will be producing additional pumps during the recovered change time. It was recommended to buy an extra set of nozzles as a backup in case of failure of existing ones.200). The cost of material was estimated at $800 and labor at $400.material cost per piece) x (time saved) x (# of changes/yr) ES = (15 pieces/hr) x ($950/piece .200 Average Number of Pump Sizes per Month = 10 ES = Estimated Savings = Net Sales Increase ES = (# of pieces/hr) x (value per piece .
000. The total time involved was five hours and forty-two minutes. In addition. The oil hole was drilled followed by large end cut. During setups. the drill had to be removed because it was in the way when the jigs were replaced. All the modular parts must be manufactured with centering holes or grooves so manual adjustment after installation is not needed. then a bolt hole was drilled. Then the parts were transferred to the line where they went through the following process. Recommended Action Employ jigs which would be modular.1 years (about 1 month) Background The company manufactures connecting rods for combustion engines. was lifted onto a table. 36 . The manipulation with the crane is completely eliminated. The cap was attached and the whole assembly bored out. cleaned off with petroleum jelly. The operators.450/yr Estimated Implementation Cost = $8. The sales are about $30. That way the heavy base part of a jig can stay in place all the time and different parts of the jig are replaced as needed. Existing Practice and Observation The aluminum die cast parts were delivered into the stock.000/yr. 4 Employ Modular Jigs to Reduce Process Set-up Times Assessment Recommendation Summary Estimated Cost Savings = $117.Assessment Recommendation No. The jigs for different operations were very heavy and therefore they had to be removed with the help of a crane. The facility is housed inside a single 200. First reference holes were made. the trained setup technicians came to perform the desired change.115 Simple Payback Period = 0.000 ft2 steel beam construction type building. in the meantime. The number of employees at this location is 170. Centering adjustments were required when a jig. were cleaning around the line.
000 x 1.96/hour = $3. The main bodies of existing jigs can be used.Anticipated Savings There is an elimination of one person during the setup operation because now the adjustment is not needed and the operator can perform the task alone.000 ES = PLM + Wages Saved = $63.000.115 The simple payback period can be calculated from the following equation: Payback Period = (Implementation Cost) / ES = ($8 115) / ($117 450/yr) Payback Period = 0.115 Material cost was estimated for $5.35 fringe benefits = $54.7 hr/chg)] x [$45/piece] = $63.000 = $117.450 + $54. The time to perform the setup is estimated to take about one hour. The time involved is estimated as three weeks.450 / year where ES = Estimated Savings Implementation Implementation requires manufacturing eight different fixture subassemblies. Based on the same wage structure as for mechanics the cost of the change would be: COST = (8 hours x 5 days x 3 weeks) x $25.450 / year where PLM = Production Lost Money Wages of qualified mechanic = $40. Total Cost = $8. PLM = [(25 chg/month) x (12 month/yr) x (4.1 years (about 1 month) 37 .000 Wages Saved $40.
however two cautions are noted here. or energy use. In order to identify a bottleneck. Upon questioning. many companies do not consider the effect of the net production rate. Changes in the specifications of the thread eliminated this bottleneck at a minimal cost to the company. 39 . the recommendation may not require more labor. glass. Conversely. Increasing the production rates can have additional costs involved. or higher quality raw materials. Identifying and alleviating a bottleneck in the manufacturing process allows an increase in throughput (pieces/person/hour) of a particular process. such as increased raw materials. In most instances. it is important to realize that the perceived (or “theoretical”) bottleneck may not. It is usually identified by waiting. be the real bottleneck. or by (idle) machines. Alleviating bottlenecks is often accomplished by installation of improved equipment or tools. If a new piece of equipment is installed. For example. They might not define a process/procedure as a bottleneck if a defective part is produced and it can be re-used as a raw material. Discussions about this topic with machine operators is advised. these quantities should remain constant or even decrease in some cases. industries that have high internal rejection rates may not require more raw materials if the defect rate is reduced. this will increase revenue. or of the entire plant. either by workers. and metals. Examples of such industries are paper. including scrap. however it could also be used to reduce production lead time. On a per unit or per piece basis. by parameter control (temperature. First. In most cases. If alleviating the bottleneck also reduces re-work. labor. the relationship between increased revenue and increased profits will be based on the amount of information available and should be handled on a case by case basis.Bottleneck Mitigation Introduction A bottleneck in manufacturing is that process (or procedure) which restricts the entire operation from running faster. if possible. humidity). Second. the issue should be brought up during the interview. operators complained that the quality of the thread made it difficult to thread the machines. in fact. it may not use more energy. It can also be accomplished by the purchase of manufactured parts. on a bottleneck. plastics. a sewing factory manager described the hand threading of the needles as the bottleneck. however. or an existing one optimized.
equipment.Questions • How has the operation changed over time? (product. machines. tools • Excess Inventory (raw materials or in process) • Excessive motion or transportation Related Recommendations • • • • • PURCHASE / INSTALL MORE EFFICIENT MACHINERY PURCHASE BETTER TOOLS CHANGE THE SPECIFICATION OF RAW MATERIALS CONTROL PROCESS PARAMETER (TEMPERATURE. product. if you can make it? • Are you considering expansion? • Why is this process/procedure the bottleneck? • Do you ever run overtime to meet production goals? (related costs) Indicators / Symptoms • Waiting .for people. HUMIDITY) USE AVAILABLE "LESS EFFICIENT" EQUIPMENT 40 . procedure) • What is the optimal rate of this process/procedure? • Can you sell more product.
Assessment Recommendation No. 5 Add Machine Operators to Reduce Production Bottleneck Assessment Recommendation Summary Estimated Cost Savings = $208,780 /yr. Estimated Implementation Cost = $47,520 Estimated Payback Period = 0.23 years ( ~3 months )
Existing Practice and Observation During interviews with plant personnel, it was stated that the production bottleneck in the plant should be the tire press division; however, it was noticed that the tire presses are idle for about 10% of the time because they are waiting on in-process material from the previous process (tire machines). Automatic and manual tire machines construct the structure of the tires so they can be molded in the presses. There are 75 automatic and 50 manual tire machines. The automatic tire machines process 9 tires per hour and require only one operator. The manual machines are less efficient, producing only 6 tires per hour with one operator. With two operators, the manual machines can each produce about 9.7 tires per hour. Since this results in a lower tires per person rate (and a higher labor cost per tire) in the tire machine division, only one operator is presently used on the manual machines. The operating cost for the tire presses are relatively unchanged by increases in production, so if the presses were to operate at maximum capacity there would be very little additional operating costs. According to management, the company can sell all the tires it can produce (at the current price) and opportunities to increase the total plant output are of great interest.
Recommended Action A second machine operator should be added to the manual tire machines in order to increase the production enough to keep the tire presses operating continuously. The additional operators on the manual tire machines will increase the cost of producing each tire in the tire machine division, but will lower the overall production cost per tire by eliminating the existing idle time of the tire presses. Idle time at the tire presses is a waste of the labor efforts of the press operators.
Anticipated Savings Under the present operating conditions, at maximum output the tire machines can only produce 23,400 tires a day and are doing so. If a second operator is added to the manual tire machines for all shifts, the maximum daily output from the tire machines division will be 27,840. If the tire presses are operating continuously they can only mold 26,000 tires a day, so it will not be necessary to keep two operators on all of the manual machines during every shift. Only enough extra operators to increase production to 26,000 tires per day will be will be needed to eliminate the idle time of the presses. The number of estimated additional operator-shifts per week is 88. We have conservatively assumed that the only costs per unit which will be affected by the increased production of tires will be from these two divisions (machines and presses). As the total production is increased, the total costs for each other division will increase but the cost per unit should remain the same. For example the total cost for raw materials will increase because more tires will be made, but the raw material costs per tire will not be affected. These increases in total cost will be proportional to the increase in revenue from sales of the new tires. The annual total cost savings, ATS, achieved by the addition of a second operator on some of the manual tire machines can be determined using the following equations: Operating cost with one operator on the manual tire machines: CIA = The cost per tire (tire machine division) with only one operator CIA = [ (CPO x HRO ) x (NAM + NMM) ] / TAO + TMC CPO = Cost per hour for machine operator HRO = Hours of production operation NAM = Number of automatic machines operating NMM = Number of manual machines operating TAO = total amount of tires produced per day with one operator TMC = cost to operate the tire machine for each tire CIA = [($32.50/hr x 24 hrs) x (75 + 50) ] / (23,400 tires) + ($0.75/tire) CIA = $4.92 per tire in tire machine division CTP = The cost per tire to mold the tires produced by single operators CTP = (NTP x HRO x CPO) / TAO + CPT NTP = number of tire presses (there is one operator per tire press) CPT = cost to run the press per tire CTP = (145 presses) x (24 hrs) x ($32.5 / hr) / (23,400 tires) + ($0.33/ tire) 42
CTP = $5.16 / tire TTPO = The total for the two processes with one operator TTPO = CIA + CTP TTPO = $4.92/tire + $5.16/tire TTPO = $10.08 per tire Operating cost with two operators on manual tire machines: CSO = cost per tire (tire machine division) with second operator CSO = (CPO) / (MPR) + TMC MPR = additional tires/hr produced by second operator on manual machines CSO = ( $32.5 / hr ) / (3.7 tires / hr) + ($0.75) CSO = $9.53 / tire The extra tires that are produced will not require any additional operators at the presses, therefore no labor costs at the presses will be associated with the additional tires--the workers will now be producing tires during the time previously spent waiting for tires to be delivered. The only additional costs that will be incurred at the tire presses are for the increased maintenance and energy costs of the machinery. CPS = cost for the press to make additional tires (no additional labor costs apply) CPS = CPT CPS = $0.33 per tire TTPT = Total cost per tire for the two processes with two operators TTPT = CSO + CPS TTPT = $9.53 / tire + $0.33 / tire TTPT = $9.86 per tire The unit savings per tire, UST, for additional tires produced will be: UST = TTPO - TTPT UST = $10.08 / tire - $9.86 / tire UST = $0.22 per tire Finally, the total annual cost savings, ATS, can be calculated using the following formula: 43
23 yrs ( ~3 months ) 44 .) ATS = $208. The total cost to train the operators.400/yr.520 / ($208.520 Payback Period = Implementation Cost / ATS = $47. the cost per tire will drop as the presses begin to operate at a rate closer to 100 percent.50 /hr) CTO = $47. can be determined using the following equation. It was stated that the cost per tire will only change in these two areas if the additional operator is used on the manual tire machines.600 tires/day) (365 days/yr. Implementation and Simple Payback The additional workers that are hired to work on the manual tire machines will have to be trained to operate the machines.78 for the additional 2600 tires produced. a twentytwo cent drop from the cost to make the first 23. CTO = NOW x THT x CPT NOW = number of workers to be trained THT = number of hours that the workers will be trained CPT = The hourly rate paid for time while training CTO = (88 workers) (24 hours) ($22. Not included in the above savings calculations is the additional revenue produced by the sales of the extra tires.10) x ($26. From the previous conclusions. The cost per tire will drop to $25.467. Assuming a 10% profit on each tire. the increased annual revenue obtained from producing the extra tires (not including the savings calculated above) would be (0.400 tires.00 when operating the presses at a 90 percent level.00/tire) x (2600 tires/day) x (365 days/yr) = $2.ATS = SPA x NAT x DPY SPA = Savings per additional tire produced NAT = Number of additional tires produced per day DPY = Production days per year ATS = ($0.780/yr) = 0. CTO.780 / yr The company has determined the cost to make one tire including all expenses is $26.22/tire ) (2.
Assessment Recommendation No. Tests in the production area have indicated that the humidity levels are not above those recommended by either the manufacturer of the cutting machine. and passed through a cutting machine which cuts them into the desired finished width and length. The rolls are then trimmed. 45 . Management has indicated that the company sells all of the sheets produced and would like to increase production levels in order to gain increased market share. This new machine would cost approximately $150. mixing them with pigments and other additives. Further discussions with the manufacturer of the raw materials uncovered that it is. The reduced production rate is due to the fact that the sheets stick together if the machine is run any faster.000. They are then stacked to a pre-determined count. They stated that the sheets would stick together if the surface temperature of the finished product was above 100˚ F. Discussions with management reveal that your company is considering the purchase of a second machine to reach production goals. packaged and shipped. and molding them into rolls. The operators feel that high humidity levels are the cause of the sticking. The bottleneck in the process is the cutting machine which is presently running at approximately 1000 sheets per hour. The option of air conditioning the entire facility to alleviate the problem was rejected by management. or the supplier of the raw materials. According to the manufacturer of the equipment. Measurements of the surface of the film indicated temperatures averaging 120˚ F. this machine should be producing 1500 sheets per hour. 6 Install Refrigeration System to Cool Product Assessment Recommendation Summary Estimated Additional Revenue = $285. a temperature parameter that is being exceeded.000/yr Net Profit Increase = $24.700/yr Estimated Implementation Cost = $13. in fact.611 Simple Payback Period = 7 months Existing Practice and Observation The process of manufacturing thin plastic sheets for the printing industry involves melting the raw materials and pellets.
.000 BTU x $600/ton Infrared Temperature Sensors (4) Controller (2) Labor: 20 hr x 2 installers x $40/hr Ancillary Equipment (utilities. Calculations show that 180. etc.600 $1.10) . of refrigeration is required to reach desired temperatures and production rates. Each unit should be controlled by an infrared temperature sensor.611 . with one ducted to the bottom of the leaving sheets.($3.000 Btu/hr air conditioning units be purchased.$600/ ton 200. We also recommend that the unit have the capability of recording the production rate of the cutting machine.095/sheet) x (0.700/yr Implementation Implementation of this recommendation requires that two 100. Estimated Savings = Net Profit Increase = IP x hr x V x P .OC Where IP = increased production/hr hr = hours of production 30 hrs/shift x 4 shifts/wk x 50 wk/year V = Value of Product ($/sheet) P = Profit Margin (assumed to be 10%) OC = annual operating cost of the refrigeration equipment Est. This will provide some redundancy in the event that one unit is out of commission.Recommended Action Install a refrigeration system with ducting to blow cool air both under the sheet leaving the cutting machine. and the other directed to the top of the stack.000 hr/yr) x ($0.800/yr) Est. Savings = $24..237 $13. Refrigeration units .800/yr.000 $396 $378 $1. and with alarms.000 BTU/hr x 1 ton/12.000 Btu/hr. Savings = (500 sheets/hr) x (6. The controllers should be specified with either Proportional Integral or Fuzzy Logic Control. Anticipated Savings The operating cost of the refrigeration equipment is estimated to be about $3.) add 10% Total 46 = $10. and on top of the stack of film.
500 Simple Payback Period = 0. Anticipated Savings Annual Sales per year/Parts per year Current Direct Labor Cost Fringe Costs for Labor (35%) Current Cost of Raw Material Overhead at 200% Direct Labor Total Estimated Cost = = = = = = $4. The new machine is expected to use the same amount of power per part but have only a 1% spoilage rate. 7 Replace Old Lathe With New Automatic Multi-station Tool Assessment Recommendation Summary Estimated Increased Profit = $239.Assessment Recommendation No. Raw material costs are about $1.000 more pieces could be sold if produced. The new machine cost is estimated as $75. Spoilage rate (defects) average 3.000/yr Estimated Implementation Cost = $67.28 years (~ 3. Annual sales are $2.000. It is believed that lowering production cost can result in increased sales and profits Recommended Action Purchase a new automatic multi-head machine tool which is estimated to produce 180 pieces per hour to replace three of the current machines.976 $1. This machine can still be operated by a single operator.741. Production on the four present machines has been 220 pieces per hour.000 per year for these pieces.720 $1.546 per part $191. Current production is 440. Competition is making inroads on profit margin.100. Direct labor costs for the machine operators are estimated to be $23 per hour and the operator works 2.000 per year. Competition has been putting pressure on the company to maintain its profit margin and sales level.360 $66.000 47 . Increased demand for pieces indicates that up to 50.4 months) Existing Practice and Observations Machined piece orders have been sufficient to use the full year's time of four machine operators.080 hours per year. Overhead (Burden) costs are estimated at 200% of direct labor costs for this company.100.000 pieces per year.000 including installation and removal costs of three old machines.85% for the current machines.000 $382.
then conservatively: Future Direct Labor Cost Fringe Costs for Labor (35%) Future Cost of Raw Material Overhead Total Estimated Cost = = = = = $95.500) / ($239.960/yr The increase in profit would be: $498. If it is estimated that overhead costs will remain the same due to increased debt costs and perhaps marketing and sales costs.150 is due to the increased sales with a better margin.660 parts/yr x ($4.Estimated Cost Per Part = $3.Annual Costs) = $259.4 months) 48 .000/yr Of this increased profit about $196.447 per part The manufacturer will thus have room to increase profit margin and produce more parts than the previous years.000/yr .680 $33.957/part = $0.28 years (~ 3. but decreased direct labor costs.175.000 $382.000 Estimated Cost Per Part = $3.$3.957 per part .510 per part) = $497. The net implementation cost is then $67.850 is the increase due to decrease in cost per part and the remaining $42.500.000/yr = $239.$3.957 per part Profit per part (estimated) = $4.589/part Estimated Profit margin = 15% Estimated Profit = (Annual Sales .000.$3. Assuming all the goods can be sold at the current price per part the profit would be: 480.720 $1.546/part .660 pieces per year.$259.490 $1.000/yr) = 0. The salvage value of the three old machines is estimated to be $7. Implementation and Simple Payback The cost of the new machine with installation is $75.500 and the simple payback is: ($67.000/yr Using the new machine and one of the current machines production will be 480.510 per part Cost Savings per Part = $3.510 per part = $0.546 per part .687.
where inspections are performed at the end of the production line.Defect Reduction Introduction The concept of defect reduction should be a focal point when considering potential productivity improvements in industrial facilities. material handling. Such a process is said to have a low “internal yield. energy. inventory. The time between the detection of the defect and feedback to the process line is often hours or days--too long to be of much use. A shortcoming of many statistically based quality control systems. wasting labor efforts.” In such a case. and requiring increased costs for inspection. frequency. Feedback from the sensors to machine operators may be achieved using 49 . installing new sensors may be a common solution or at least part of the solution. is that they are intended only to separate the defective products from the good products. and 3) recommending actions which will reduce or eliminate the defects. more importantly. Fortunately. The first two items above can normally be determined by questioning plant personnel (see the question list in the next section for guidance). it does very little if anything to reduce the number of defective items produced. Time spent producing defective parts can be costly to manufacturers. Often. 2) determining why those defects occur.” or high “internal scrap rate. the nature. One note of caution: it is important to distinguish between defect rate and scrap rate. While this effectively reduces the number of defective products which are passed along to the customer. The major tasks involved in making a defect reduction recommendation will be: 1) identifying those defects which are most costly. Once the nature of the most costly defects are identified. the defects may be “hidden” from management (because there are no defective parts to be seen) but may result in significantly reduced productivity because the number of acceptable items produced by the machine or process will be less than optimal. and causes of product defects are normally well-known by quality control personnel or machine operators. the most difficult task in identifying and estimating the potential benefits of an assessment recommendation is obtaining reliable information. provide valuable feedback either to machine operators or directly to the process equipment. raw materials. A process can yield a large number of defects but zero scrap if the defective items are re-used in the process. Sensors can be used to detect the occurrence of defects and. and clean-up.
If the conditions which cause a defect are known (e. or by indicating to the operators that parameter adjustments (temperature. recycle.. 50 . and feedback from the point of defect detection to the operation which caused the defect is immediate. Using people to conduct 100% inspections would be extremely expensive and impractical in most circumstances. Immediate feedback can also be used to prevent “serial defects” (a large batch of defective products) by shutting down the production line until the cause of the defect is identified and fixed. but to automatically reject the defective part and scrap. etc. They have the capability to inspect at high rates of production and provide visual. positioning.g. temperatures. In fact. pressure. Often. sensors may be used to perform 100% inspections with high reliability and a very low cost. etc. humidities. broken or chipped tools.flashing lights and/or buzzers which are triggered by the sensor output. Various types of sensors are available which can be used to detect parameters such as: • Positions • Pressure • Shapes (2D or 3D) • Temperature • Dimensions • Humidity • Presence of foreign matter • Vibration • Damage/Displacement • Counts or cycles • Color mismatch • Timing The most thorough quality control system is one in which 100% of the products are inspected after each process. or repair it. or procedural modifications which will reduce those defects in the future. When defects commonly occur as abnormalities or isolated incidents. shutting down the process or machine is recommended unless the start-up efforts are extensive. In cases where serial defects are a common problem. it is usually best not to shut down the production line. Defects should be detected as soon as possible after they have occurred to avoid additional value-added processes from being performed on a product which is already defective. pressures. audio. This feedback can be used to identify the causes of defects and can lead to equipment. process. movements.). material.) are needed. sensors can be installed to detect when those conditions occur and adjust the appropriate parameters or stop the process before defects are produced. sometimes the defect can be detected before it occurs. or process control feedback. however.
can you sell it? • Are overtime hours ever worked to meet production demands or compensate for defective batches? If so. in-process recycling.)? • What causes each type of defect? • If you can make more product. lost production time. etc.Questions to Ask • What percentage of products are inspected? • In what stages/locations of the process do the most rejects (or clean-up) occur? • What are the most common types of defects? • How much does each type of defect or clean-up cost per year (labor.. OR ADDING VALUE TO DEFECTIVE PARTS) 51 . OR PROCEDURES TO REDUCE PRODUCT DEFECTS • DEVELOP STANDARDIZED PROCEDURES TO REDUCE PRODUCT DEFECTS • INSTALL SENSORS TO DETECT. how many man-hours per year. PROCESSES. and at what average pay rate? • Are in-process and/or finished goods inventories built up due to potential defect problems in the production process (to ensure that the customer gets the products on time)? If so. extra equipment or processes--i. repair/rework. what percent of existing inventory is considered excess? What is the value and quantity of overstocked goods in inventory? • Do standardized procedures exist for the processes where defects most often occur? • Does one machine operator produce significantly fewer defects than others? (If so. that operator’s expertise should be used to develop standardized operating procedures for training less effective personnel.e. SERIAL DEFECTS. Related ARs • MODIFY EQUIPMENT. regrind--etc.) Symptoms/Indicators • High defect rates • High scrap rate • Large in-process or finished goods inventories • Large inventory of scrap • Frequent regrinding. material. REJECT. AND COUNT DEFECTIVE PARTS AND PROVIDE FEEDBACK (TO REDUCE INSPECTION COSTS.
HUMIDITIES. PRESSURES. POSITIONING.) • INSPECT PARTS EARLIER IN THE PRODUCTION PROCESS (TO REDUCE ADDING VALUE TO DEFECTIVE PARTS) • INSPECT RAW MATERIALS PRIOR TO PROCESSING OR WORK WITH SUPPLIERS TO IMPROVE RAW MATERIAL SELECTION OR QUALITY (TO AVOID DEFECTS) 52 .• INSTALL SENSORS TO DETECT AND CONTROL CONDITIONS WHICH LEAD TO DEFECTIVE PRODUCTS (TEMPERATURES. ETC. MOVEMENT.
094 Simple Payback Period = 0. the time from when the glassware begins to be knocked over until the operator fixes the problem was observed to be extensive (resulting in 10 or more consecutive tipped glasses before the problem was fixed). 53 . Due to the need for the operator to make such frequent adjustments.Assessment Recommendation No. the operator makes a small adjustment to the swing-arm to eliminate the problem. The bottles were typically knocked over during one of three processes: 1) when being slid from the molding stations onto the conveyor line by the “swing-arms. rakes. 8 Reduce Defects By Reducing Bottle Tipping Assessment Recommendation Summary Estimated Production Time Savings = 630 hrs/yr Estimated Cost Savings = $398. there are 6 to 8 molds and swing-arms which the operator must monitor and frequently adjust. Although the required adjustments are minor and usually take less than one mold cycle to perform (less than 10 seconds). freshly molded glassware is removed from a mold and placed on a level surface next to the conveyor.4 years (5 months) Existing Practice and Observation During the assessment visit. At the molding stations.160/yr Estimated Implementation Cost = $152. A mechanical device (“swing-arm”) then slides the glassware onto the moving conveyor. At a typical molding station. When the line operator notices that the glassware from one of the molding stations is repeatedly being knocked over. Based on experience. a significant percentage of the glassware on several of the production lines was observed to be knocked over during movement from the molding stations to the entrance of the Lehrs (annealing ovens). Most instances of fallen glassware occurred at locations 1 and 3. Diagram #1. etc. interfaces between conveyors. the operator knows the necessary adjustment to make. it seemed as if the operator was “fighting a losing battle” and that re-design or modification of the transfer devices (swing-arms.” 2) during the turn in the conveyor line at the “star” wheel.) is needed in order to significantly reduce the amount of fallen glassware for an extended period of time. These locations are indicated in AR#8. and 3) while being pushed by the rake from the molding station conveyor onto the Lehr conveyor.
the rake is raised on the reverse stroke so it passes over the glassware (see AR#8. Diagram #1: Plan View of Glassware Transport System from Molding Stations to the Lehr Entrance The rake at the Lehr entrance moves back and forth across the molding station conveyor to (and from) the Lehr conveyor."star" wheel 1 mold conveyor 2 Molding Station "swing-arm" 3 Lehr Lehr Rake Lehr conveyor rake slides bottles from mold conveyor onto lehr conveyor AR#8. Diagram #3). No additional knock-downs occur at the raising rakes. all rakes are presently capable of raising on the return stroke and rake motion adjustment is a common part of the 54 . According to facility personnel. Diagram #2). On other production lines. On the forward stroke (from the molding station conveyor to the Lehr conveyor). On the reverse stroke for several of the production lines. the rake pushes glassware onto the Lehr conveyor. the rakes were observed to remain just above the conveyors and therefore knock over the glassware which moved behind the rake while it was in front of the molding station conveyor (see AR#8.
production line set-up procedures. design changes which may reduce the knock-over rate for small glassware may not work for large glassware (and vice-versa). glassware which exits the Lehr and has been knocked over is immediately rejected because of surface defects. and/or “top-heavy” glassware is most susceptible to falling over. These sensors should also be capable of recording the number of tipped bottles which occur over a period of time (per shift) to provide feedback to management regarding machine and operator performance. 25% of the glassware entering the Lehr was observed to be knocked over. More importantly. Facility personnel claim that 9 of the 10 production lines have frequent problems with fallen glassware. primarily: 1) the “swing-arms” which slide the glassware onto the conveyor in front of the molding stations. modify (or re-design) the mechanical devices which are causing the glassware to fall over. it may also help reduce the amount of fallen glassware to attempt to schedule similar (in terms of size and shape) glassware to be produced on the same line whenever possible. and 2) the rakes which push the glassware onto the Lehr conveyor. Hence. Since there is a wide degree of variance between product sizes and shapes. 55 . Observations of inefficient rake motion on the day of the assessment may indicate that either some of the rakes are prone to becoming “unadjusted” or that the rake adjustment portion of the set-up procedures is sometimes not properly performed. On the line(s) with non-raising rakes and glassware with a geometry susceptible to tipping. and some shapes are more prone than others to being knocked over. Recommended Action Reduce product defects by installing sensors which detect when glassware is being knocked over and provide immediate feedback (a flashing light) to the line operators. Tall. According to the selector personnel in the “cold room” inspection and packaging area. slender.
Represents a fallen bottle Lehr Positon #1 .Rake Back Lehr Position #2 .Glassware Knocked over on Rake Return AR#8.Rake Forward Lehr Position #3 . Diagram #2: Plan View of Glassware Transfer from Mold Station Conveyor to the Lehr Conveyor 56 .
Improperly Adjusted Rake Travel Path Glassware Lehr Lehr Rake Mold Conveyor Lehr conveyor Properly Adjusted Rake Travel Path Glassware Lehr Lehr Rake Mold Conveyor Lehr conveyor AR#8. Diagram #3: Existing Rake Travel Paths--Improperly Adjusted Travel Path Results in Fallen Glassware on Return Stroke 57 .
For the glassware shapes which are prone to tipping.RR) x SLR where NPL APH FPT = number of production lines with tipping problems. Twenty-five percent of the glassware on those 9 production lines is prone to tipping due to the size and shape of the products. was calculated as follows: ACS = NPL x APH x FPT x PFTG x FTGA x FTG x (1 . hrs/yr = fractional productive time (fraction of the facility operating hours for each production line which are non-setup hours). ACS. This is viewed to be a conservative assumption. again. an average of 10% of the glassware entering the Lehrs is knocked over. as much as 25% of the glassware entering the Lehrs on several of the production lines was observed to be tipped over).Anticipated Savings This analysis includes the following assumptions: • Nine of the production lines have frequent problems with fallen glassware (based on interviews with facility personnel). no units = annual production hours. The time saved due to the decreased defect rate (if the defect rate decreases. • • • • The annual cost savings. Seventy-five percent of the fallen glassware can be prevented by implementing this recommendation. Actual reductions in fallen glassware should be greater. is considered to be conservative (on the day of the assessment. no units 58 . This assumption is based on observations by our assessment team on the day of our visit and. The annual production hours for a production line are considered to be the annual plant production hours minus the average monthly set-up hours per production line. based on results achieved in other industrial facilities. the required quantity of acceptable glassware will be produced in a shorter amount of time) can be used to make other products and no production line idle-time will occur as a result of the increased production rate.
no units FTG = fraction of “tippable” glassware (fraction of products on these production lines whose shape and size make them prone to tipping). According to facility production management.(1440 hrs/yr) APH = 6. thirty-five percent of the glassware produced is rejected.PFTG = present fraction of tipped glassware (fraction of the total glassware that was observed to be tipped over).35)(632) ACS = (9)(70 hr/yr)($632/hr) = (9)($44. hrs total number of production lines in the facility. Each “shape” change requires a mold change-out and process set-up. APH = (8400 hrs/yr) . Hence.(60 set-ups/month)(12 months/yr)(20 hrs/set-up) / (10) = (8400 hrs/yr) . $/hr (per production line) According to facility management. Thus.0. FPT = APH / FPH = 6960 / 8400 = 0. Production lines in the plant are in operation 24 hrs/day. no units FTGA = fraction of tipped glassware that is avoidable. for a total of 8400 hrs/yr.10)(0. APH.TMS x (12 months/yr) x AST / TNPL where.25)(1 . no units average duration of a set-up period. no units . 7 days/wk. is the fraction of the facility operating hours for each production line which are non-setup hours.960 hrs/yr The fractional productive time.240/yr) 59 = = = = facility’s annual production hours.35 for the typical rejection rate. Finally. about 60 glassware “shapes” are produced in a typical month. The average combined set-up and change-out time is about 20 hours. no units RR = typical rejection rate for a batch of glassware. the annual cost savings is estimated as ACS = (9)(6960)(0. 50 weeks a year. no units SLR = shutdown loss rate (cost per hour for a production shutdown). Thus.75)(0. the annual production hours per production line. can be estimated using the following equation: APH = FPH . RR. FPT. FPH TMS AST TNPL Thus.83)(0.83. hrs/yr total number of monthly production changes (“set-ups”). we will use a value of 0.
3) rejecting the fallen bottles using compressed air (to prevent wasted time in the cold room handling fallen glassware). for a total of $20. A representation of the proposed tipped glassware sensing system is shown in AR#8. The production lines should be observed for extended periods of time. purchase.160/yr The number of hours per year which would be made available for producing additional products if the bottle tipping problems are improved is estimated as 70 hr/yr (per production line). Implementation Re-design and modification of the mechanical devices which are causing the glassware to fall over will require an in-house study. this estimate is considered to be higher than the expected costs but is subject to change dramatically depending on the required modifications which are uncovered by the in-house study and engineering recommendations. representing a [(70 hr/yr) / (6960 hr/yr)] x 100% = 1% productivity increase. documenting the most common causes of fallen glassware on each production line and the actions taken by the mold operators to correct each type of problem. The mounting bracket for the sensors should allow the vertical adjustment of the top sensor to allow the system to be used for glassware of various heights. 2) setting off a beacon (flashing light) to warn the line operator of the problem. Diagram #4. Re-design of the mechanical components is estimated to require 200 engineering hours. A set of two through-beam optical sensors would be needed at each sensing station. Fabrication.000. and installation of new components is estimated at a total of $100. resulting in a total estimated project cost of $120. Based on results in other facilities. The system would be capable of sensing: 1) when a bottle (or a number of bottles in a pre-set period of time) has fallen. at $100/hr . This will expose the mechanical components which need to be re-designed and may also suggest possible solutions (based on the mold operator’s present methods of repairing each problem).000.000 in engineering expenses.ACS = $398. with one sensor located just above the conveyor line at the bottom of the glassware and the second sensor located at an adjustable position vertically above the bottom sensor. and 4) recording the pieces of fallen glassware during a pre-set period of time. 60 .
Diagram #4: Proposed Tipped Glassware Indicator System 61 .Optical sensor setup #1 emitter receiver Result from upright bottle warning beacon Power supply power supply power supply solenoid valve Inputs to PLC Inputs to PLC From sensors from sensors output to sensors Outputs from from PLC results of sensors Molding Station PLC Lehr Lehr Inputs to PLC Power supply from sensors power supply Optical sensor setup #2 emitter Output from results of sensors Result of tipped bottle receiver warning beacon Power supply power supply solenoid valve AR#8.
Implementation will also require the fabrication of adjustable mounting brackets (for the optical sensors) which can be created in the company machine shop. Modifications to the existing compressed air line to allow the use of the solenoid controlled compressed air bottle rejecters would cost an additional $500 per system. The approximate cost for the components are $860 for the PLC. The simple payback period can be calculated with the following equation: Payback Period = (Implementation Cost) / ACS = ($120. 2) momentarily open the solenoid valve on the compressed air nozzle (to blow the fallen bottle off of the conveyor). This is shown in the “Optical sensor set-up #1” box in Diagram #4.160/yr) Payback Period = 0.If a bottle is upright. only the bottom beam will be interrupted and a signal will be sent to the PLC which.094) / ($398. the total installed cost for the fallen bottle sensing system would be $3.094) / ($398. The purchase and installation of a programmable logic controller.160/yr) = ($152. $49 each for the solenoid valves. in turn. An approximate cost for the design and fabrication of the sensor mounting assembly is estimated at $1000. If a bottle has fallen. or $32. two warning beacons. two solenoid air valves and four through-beam optical sensors would be required to place two sensing stations on a production line. One PLC can control at least two of the sensing stations.566 per production line. the beam from both sensors will be interrupted and no action will be taken by the programmable logic controller (PLC). will: 1) switch on the beacon. This is shown in the “Optical sensor set-up #2” box in Diagram #4. $148 each for the warning beacons.4 years (5 months) 62 .000 + $32. and $203 each for the optical sensors.094 for 9 production lines. and 3) add to the count of fallen glassware. Hence.
All the gaskets that don't meet standards are recycled and all the parts without gaskets are cycled through the process until they receive an acceptable gasket.74 per gasket. All the inspection is done by separate personnel to ensure that there are no unacceptable gaskets being allowed to be packaged. 9 Develop Standard Procedures to Improve Internal Yields Assessment Recommendation Summary Estimated Cost Savings = $95. re-melted. The average worker applies 120 gaskets an hour to the automotive parts and approximately 99 of the gaskets pass the final inspection. The operators who don't realign their machine have an acceptance rate of 99 out of 120. The part also gets sent back and has to go through the process again. Each worker that applies the gaskets receives incentives determined by the average amount of acceptable gaskets that they can attach per day. He was taught how to do this by another operator but there is no company procedure to teach the newer operators how to realign the machines.67 years (8 months) Existing Practice The plant receives unfinished automotive parts from other companies and is contracted to make and attach rubber gaskets onto the different automotive parts. After the gaskets have cooled the parts receive a final inspection before being packed for shipping. Workers take the gaskets while they are hot and mold them onto the parts to allow the gasket to cool and solidify. 63 . and remolded so that they can be re-applied to other parts. The contracted rate the company receives for making and attaching the gaskets is an average of $0.753 / yr Estimated Implementation Cost = $60. If the gaskets have any type of defect or did not mold properly to the part.Assessment Recommendation No.881 Estimated Payback Period = 0. The operators that realign the machines have an acceptance rate of about 105 out of 120. The gaskets are attached to the parts so the parts can be packaged and shipped to the retailers. The experienced workers do not offer to teach all the new operators because they feel it will hurt the incentives that they receive. the rubber gasket is then removed and placed back into the rubber melt to be reused. The other 21 gaskets are removed. One operator explained that he is able to produce less defects because he realigns the machines before each of his shifts. Several of the more experienced operators are able to receive much higher incentives than the rest because of their larger acceptance rates.
Recommended Action Use the knowledge of the best machine technician to help reduce the internal scrap rate of gaskets for the less experienced operators.120 units per year ATB = annual production lost due to aligning machines before each shift ATB = NOS x NWS x DPY x TTA x NPR TTA = time required to align machine each time ATB = (2 shifts)(22 workers/shift)(260 days/yr. The re-melting ensures that there is no wasted material. The realignment alone will increase the acceptance rate of the gaskets by approximately 6 percent.166 hrs/alignment)(105 units/hr) ATB = 199. This can be determined by the following equation: API = IPR .399 units/yr. 64 .OPR) NWS = number of workers per shift NOS = number of shifts operating HPS = number of hours per shift DPY = number of days per year in operation OPR = old average production rate.ATB where.)(0. units per hour IPR = (22) (2 shifts) (8 hours/day/shift) (260 days/yr) (105 -99)(units/hr) IPR = 549. IPR = new production possible from increased rate IPR = NWS x NOS x HPS x DPY x (NPR . Anticipated Savings The annual increased production. However. the internal defect rate (defects which occur within the process) was found to be about twenty percent for most operators. Have the technician develop a company procedure for realigning the machines so all the operators can realign the machines before their shifts. The company has a low shipped defect rate because it inspects every gasket before packaging and removes all the bad gaskets to be re-melted. units per hour NPR = new average production rate. will be the increased amount of acceptable units per hour that the operators will be able to produce. then twenty percent of the operator's time and the energy required to melt the rubber are wasted. API. but if twenty percent of the gaskets have to be removed and re-melted.
the annual increased production will be: API = (549.(199.399 units per yr. Implementation The production lost due to implementation.) . The cost of this production time can be determined as follows: PLI = PDT + TCP where PDT = production lost due to down time for training PDT = DPD x PPD DPD = number of days production will be down PPD = production per day 65 . The annual total cost savings. There will be no additional labor needed to produce these additional units so the cost of the labor per unit will be zero.) API = 349. It should be noted that the machine maintenance and energy costs per acceptable part will also decrease and contribute to the above savings. the profit on the additional gaskets was calculated to be 37% because of the absence of labor costs.Hence. ACS = API x PPU x PM PPU = price received per unit of output PM = profit margin ACS = ( 349. will be the time that the production is down for the training of operators and the time the experienced operators need to create the standard operating procedures.753 / yr.74/unit) (37 % ) ACS = $95. In an effort to be conservative.721 units/yr) ($0. we have neglected these extra savings. ACS. The profit per gasket will now include the money that was budgeted to go toward the labor of the gasket because the additional gaskets have no labor costs. This will result in an increased profit margin.721 units per yr.120 units per yr. Estimating the existing profit margin to be 10%. PLI. will be the additional profit earned from the increased output of gaskets.
881 (The number above is higher than the actual costs because it includes raw material and energy costs which wouldn’t be increased during production down time. ITC = PLI x PPU ITC = ( 82.74/ unit) ITC = $60.800 units Hence.753 / yr. will be equal to the cost of the units lost. Payback Period = 0.67 years (8 months) 66 . ITC.736 units/ day) PDT = 65.472 units TCP = production lost from operator working on standard procedures TCP = NOF x TPR x TWP NOF = number of operators working on procedures TPR = production rate for these operators TWP = time spent working on procedures TCP = (4 operators) ( 105 units / hr) (40 hrs) TCP = 16.272 units ) ($0. the production lost from implementation is: PLI = 65.PDT = (2 days) (32.881 / $95.272 units The total cost of implementation.472 units + 16.800 units PLI = 82.) Payback Period = Implementation / API = $60.
etc. labor costs. i. These are ARs which can be related to unwanted shut downs of the assembly/production lines. Examples of costs for downtimes in various industries are summarized in the following table.000/hour $30. however. Evaluating Electric Motors.000/hour $200.000/hour $100. but we expect that the greatest cost savings will result from reduced downtime. raw material costs. sub-categories of PM which can form the basis of useful recommendations and which can be presented in a way likely to provoke management into implementing them.7 Estimated Downtime Costs for Selected Industries Forest Industries Food Processing Petroleum & Chemical Metal Casting Automotive $7. operating hours.e. Jean. Savings may be present in terms of reduced energy costs and repair costs from improved maintenance practices . annual sales. 67 . These generally fall under the heading of risk management which is important to the manufacturer but difficult to properly assess during a one day audit. Ohio. There are. Linclon Electric Company.Preventative/Predictive Maintenance (PM) Introduction There are many economic analyses which point out the value of PM but they are usually of a complexity and detail to make them useless for the IAC director during a one day audit. If the company cannot (will not) indicate the cost per hour of production downtime it can be easily estimated with normally obtained data.000/hour $87. Cleveland.000/hour Questions to Ask • Are there shutdowns of the production process? • Are these shutdowns unscheduled? • What are the duration and frequencies of these shutdowns? • What are the reasons for the unscheduled stoppages? • What is the cost/hour of production downtime? 7Revelt.
Symptoms/Indicators This type of recommendation will probably only be identified by discussion with plant personnel as the occurrence of an unscheduled shut-down while you are present is unlikely. but asking questions may elicit an entirely different AR than the two we present here. Since the shut-downs are usually documented by the line foreman or other management. • ELIMINATE SHUT-DOWNS OF CONTROLS DUE TO OVERHEATING • TREND MOTOR TEMPERATURES AND VIBRATIONS LEVELS TO PREDICT MOTOR FAILURE 68 . it is possible to identify the cause of the shut-downs and their duration. Related ARs Two case studies are included under this heading. The scheduled shut-downs should be investigated to see if they would benefit from "quick change" approaches. The rewards for recommendations which can reduce or eliminate these shut-downs can be reported with some confidence and be logically defended.
the associated production line stops. several computer systems “crashed” (shut down) because the internal temperature in the computer control cabinets exceeded the maximum allowable cabinet temperature. In addition.e.5% of the cooling season (i. One is referred to as the “516 Forming Controller” and the other is the “570 Electronic Commander. To avoid dust build-up in the cabinets.5% of the cooling hours. There are two computer controls which are most susceptible to overheating shutdowns. The minimum shutdown period consists of 15 minutes to re-start the computer and at least another 30 minutes to re-start the production line. the doors are closed as soon as the outdoor temperature is low enough for the HVAC system to maintain the desired room temperature. these controls shut down whenever the internal temperature in the cabinets exceed 85˚F. 10 Eliminate Shutdowns of Controls Due to Overheating Assessment Recommendation Summary Estimated Productivity Savings = 16 hrs/yr Estimated Cost Savings = $10.. According to a plant electrician. about 16 hours of production line shutdowns were caused by these cabinets overheating in 1995.” According to a plant electrician. Common engineering practice is to design cooling equipment to provide the desired room temperatures for 97. Both are located in the Process Control/Computer Room (see Figure 1). To prevent another shutdown. for 2. When these controls shut down. Once the problem is traced to the computer cabinet. the computer sometimes shuts down during second or third shift when the available staff is not trained to fix the problem.09 years (1 month) Existing Practice and Observation During the assessment visit. a typical system is undersized and will not be able to maintain the 69 . This problem has existed during very hot weather since the systems were installed. the doors to the cabinet are left open and fans are placed in the room until the room temperature becomes cool enough to allow the cabinet doors to be closed again. indicating that the cooling equipment for the room is undersized (no additional heat generating equipment has been added to the room).112/yr Estimated Implementation Cost = $812 Simple Payback Period = 0. This results in even longer production shutdowns of up to 7 hours. The cost of lost production when a line is shut down is estimated to be about $632/hr per production line.Assessment Recommendation No. the cabinet is opened and a reset button must be pressed.
can be calculated as follows: ACS = ALPT x SLR where. more visually noticeable location). neglecting the potential costs in lost production caused by the room overheating. Anticipated Savings The annual cost savings. This procedure should be presented to all qualified staff who may be in the facility when this problem arises. the sensor can be installed inside the cabinet and wired to a warning light which can be installed on the cabinet exterior (or another. ACS. A list of these staff members. the warning light will flash indicating to the technicians in the control room that the cabinet should be opened in order to prevent a production shutdown. The existing cooling equipment may have been sized in this manner. A standard operating procedure should be written by personnel on the electrical staff who are presently trained to deal with these problems. ALPT = annual lost production time due to overheated computer controls (for all production lines combined). The sensor can be set to send a signal to the warning light when the internal temperature of the cabinet exceeds 80˚F.desired room temperatures). hrs/yr SLR = shutdown loss rate. Recommended Action Eliminate costly production shutdowns due to overheating computer control cabinets by installing temperature sensors and warning lights on the cabinets. In addition to either of the recommendations above. When this temperature is exceeded. A more expensive solution would be to install additional cooling equipment to ensure that the room remains cool enough during all hours of the year. $/hr (per production line) 70 . This will minimize lost production time. control room personnel or someone on the electrical staff for all shifts should be trained on how to get the computer system back on-line whenever a shutdown due to overheating occurs. Since the shutdowns are said to occur when the internal cabinet temperature exceeds 85˚F. should be attached to the cabinets to minimize time wasted searching for someone who is qualified to correct the problem.
This system is shown on the following page. of Warning Systems Needed 2 2 2 2 2 2 Total Cost $230 $172 $30 $50 $330 $812 Item Description Temperature Sensor Warning Beacon 5 Amp Relay AC/DC voltage adapter Labor (6 man-hours) Total Hence. The resulting total approximated installation cost is $812. Unit Cost $115 $86 $15 $25 $165 $406 No. there are other alternatives to solving this problem and eliminating costly production shutdowns which occur as a result of overheated computer controls. The bottom line is: the control shutdowns are economically avoidable and there are a number of options available. a warning beacon.112/yr) Payback Period = 0. 71 . implementation of the overheating warning system will require the purchase and installation of a temperature sensor. These options would be more expensive than the proposed warning system but would likely also result in a return on the invested capital in less than two years.Thus.1 years (about 1 month) As mentioned previously. or 2) rearranging the cooling system supply and return air ducts to provide more efficient cooling. or $165 per system. Payback Period = (Implementation Cost) / ACS = ($812) / ($10. ACS ACS = (16 hr/yr)($632/hr) = $10. The estimated installation for each system will require about 6 hours at $27.112/yr Implementation For each of the two computer control cabinets. The material costs for these items are shown in the table below.50 per hour. a 5 amp relay. Other feasible options may include: 1) increasing the cooling capacity of the existing cooling system (install an additional cooling unit). and an AC/DC voltage adapter.
4 C Warning Beacon Computer Control Cabinet Computer Control Cabinet 72 .Proposed Warning System Ac/ Dc voltage adaptor (power supply ) 5 Amp relay switch Temperature Sensor 69.
Anticipated Savings Cost savings can result from three areas: 1) Reduced un-planned process downtime. Savings for each of the above were estimated as follows: 73 .200 Simple Payback Period = 0. very little preventive maintenance is performed at the facility due to a stated lack of manpower. Neglecting small motors (conveyor motors.2 years (about 2 months) Existing Practice and Observation Presently. 2) Reduced motor rewind costs. As a result.353/yr Estimated Implementation Cost = $4. The combined ratings of these motors total 3. An outside consultant can be hired to perform periodic measurements and/or organize and train your staff to perform them. etc. some motors and process equipment were observed to be very dirty and poorly maintained.Assessment Recommendation No.350 hp. there are about 20 motors which are critical to production operations.). thus allowing the avoidance of costly process downtime. cooling fans. motors and process equipment operate in a very hot environment which contributes to shortened component lives and equipment failure rates which are higher than normal . In addition. and 3) Reduced motor electricity costs. Recommended Action Establish a predictive/preventive maintenance program which will include periodically cleaning equipment and taking measurements on critical process equipment which will indicate potential problems and allow the scheduling of maintenance and repairs to a convenient time. including air compressors. and the furnace air supply fans. These factors combine to result in unexpected (and costly) process downtimes. and motors are repaired only when failure occurs. 11 Begin a Predictive / Preventive Maintenance Program Assessment Recommendation Summary Estimated Cost Savings = $21.
. and assuming there are 3 un-planned motor failures per year on critical process motors. motor rewinds represented 85% of the total number of motor repairs (on average). and the nature of the production line. and 7) restarting the process line. It is assumed that similar results can be achieved at this facility.168/yr 2) Reduced motor rewind costs. the estimated production cost savings due to implementing a preventive maintenance program is: Production Cost Savings = (Motor Failures/yr) x (Lost Prod. 5) acquiring the replacement motor. motor replacement could take much longer. no units = total number of motors (considered in this analysis) at the facility. Depending on the size of the motor. no units = estimated cost of rewinding a motor with horsepower “n”. . x (Cost of Lost Prod. no units 74 . 6) installing and aligning the replacement. Since records of motor repairs and costs were not available. the table below was used to obtain an average cost per motor repair for both the existing maintenance methods and after a preventive maintenance program has been established. it takes about 8 hours to remove and replace a failed production motor. Utility representatives have indicated that in a survey of facilities with no preventive maintenance programs. 2) electrical disconnection. . Cost of Rewind = ( N40 x RWC40 + . . . 3) unbolting. After preventive maintenance programs were established. Time/Failure) . + Nn x RWCn + . labor union requirements. availability of a replacement motor. the number of rewinds was reduced to about 20% of the total.) = (3 failures/yr) x (8 hrs/failure) x ($632/hr) Production Cost Savings = $15. Using 8 hours per replacement. . The average cost of a motor rewind for this facility was estimated as: Ave. + N800 x RWC800 ) / NT where Nn RWCn NT = number of motors at the facility with horsepower “n”. 4) motor removal. including: 1) accessing the motor.1) Reduced Un-Planned Production Downtime: According to a survey of maintenance references and consultants.
295 $1. Greenberg. Existing Average Repair Cost per Motor = 0. hp 40 60 75 100 125 250 800 Cost of Rewind 8 $1. the existing repair costs are estimated as: Existing Repair Costs = (Motors Repaired/yr) x (Average Repair Cost) Existing Repair Costs = (4 motors/year)($2. p. alignment. Average Repair Cost per Motor with P.. The results for both are: Estimated Average Cost of a Motor Rewind (for this facility) = $2..212/yr 8 9 Nadel. Katz.500 $1.053/motor) = $4.610 $1.80 x $752/recondition + 0. Shepard.M. = 0. and de Almeida.M. 75 .M.M.820 $2..000 $1.214 $1.Motor Size.578 Recondition vs. Energy Efficient Motor Systems.. varnishing. Repair Costs = (4 motors/year)($1. Assuming the cost of rewinding a motor is 3 times that of reconditioning a motor. Rewind Premium $680 $864 $1. S. 264.735 The average cost of reconditioning (bearing replacement.M. program are estimated as: P.M. S.032/motor) = $8.. G.157 $1.15 x $752/recondition + 0.020 Cost of Reconditioning 9 $340 $431 $500 $536 $606 $971 $2.) program is established. M. A.944 $5.85 x $2. = $1.258/rewind Estimated Average Cost of Reconditioning a Motor (for this facility) = $752/recondition Then.074 $1. etc. cleaning.) a motor for this facility was estimated similarly.053/repair For four motor repairs per year.20 x $2.258/rewind Average Repair Cost per Motor with P. Repair Costs = (Motors Repaired/yr) x (Average Repair Cost) P.915 $7.032/repair and after a preventive maintenance (P.128/yr and the repair costs after implementing a P.258/rewind Existing Average Repair Cost per Motor = $2.
$4. Among other factors. .916/yr 3) Reduced Motor Electricity Costs.212/yr = $3. x (Percent Savings) x (0.128/yr .02) x (0. program.887 kWh/yr) x ($0.168/yr + $3.0308/kWh) Energy Cost Savings = $9.916/yr + $9. and temperature measurements. and will assume these savings to be 2%.Hence.0308/kWh) = (314. Repair Costs Reduced Repair Costs = $8. the annual reduced motor repair costs are estimated as: Reduced Repair Costs = Existing Repair Costs .746 kW/hp) x ($0. we recognize that efficiency improvements would most likely occur as a result of implementing a P.350 hp) x (0.699/yr = $28.699/yr Total Cost Savings: The total estimated annual cost savings provided by instituting a preventive maintenance program for your motor systems is: Total Cost Savings = Production Cost Savings + Reduced Repair Costs + Energy Cost Savings Total Cost Savings = $15. . including voltage. . these savings could result from: • Improved lubrication • Proper alignment and balancing • Correction of voltage imbalances • Reduced motor temperatures • Reduced efficiency losses caused by motor rewinds and failures • Improved drive system performance Energy savings are estimated as: Energy Cost Savings = (Total hp of Motors Considered) x (Load Factor) x (Operating Hours) . Usage Cost) = (3.75) x (8400 hr/yr) x (0.M.746 kW/hp) x (Elec. vibration. Cases have been documented where the efficiency improvement resulting from improved maintenance practices was as high as 10-15%. Although it is difficult to accurately estimate motor system efficiency improvements which are achievable in your facility without performing a complete survey of the motor systems. power.M.783/yr 76 .P. .
783/yr .230/yr.200/yr = $7.200) / ($21. and 2) continuing investment. 3) Consulting Costs: It is assumed that a preventive maintenance consultant will be required to provide initial support and training for the program.000 + $1.230/yr + $1.430/yr = $21. The initial training is estimated to require 5 days at $600/day.430/yr and the initial investment is estimated to be $3. then provide on-going inspections bi-annually. 2) Materials: A vibration meter and temperature probe can each be purchased for about $1000 and $200. The electrical instrumentation required should already be a part of the existing instrument supply. would cost $1200/yr.2 years (about 2 months) 77 . for a total of $3000. The continuing investment is estimated to be $6.96/man-hour) = $6. Subtracting the continuing investment from the total cost savings yields: Net Cost Savings = $28. Additional material costs for items such as filters and lubrication will be greater than normal initially. but it is assumed that over time these costs will be negligible in comparison to benefits resulting from reduced repair costs and increased operating efficiencies.$7. The bi-annual inspections would each require one day and.353/yr) = 0.Implementation The costs of implementing a preventive maintenance program were estimated as follows: 1) In-house Labor: Estimating that it would require 2 hours of an electrician’s time per month per motor to perform preventive maintenance procedures.353/yr The simple payback period for implementing a motor preventive maintenance program would be: Payback = ($4.200 = $4. The consulting rate is about $600 per day.200. the in-house labor costs would be (1 hrs/month/motor) x (20 motors) x (12 month/yr) x ($25. together. The above costs are of two types: 1) initial investment. respectively. and about 30 motors can be diagnosed per consulting day.
Labor cost saving opportunities arise when worker’s Time or Skills Are UnderUtilized. Many factories have operations that have remained unchanged for decades. Workers are performing tasks better performed by automated equipment, such as inspecting or packaging. Some are being asked to move product excessive distances, wasting time and labor dollars. Ineffective production leads to a disinterested, discouraged and inefficient work force. Workers perform less than ideally when (they feel) their efforts have little or no effect on the result. Examples of this include unclear definitions of defects, duplicative inspection, and equipment that goes out of adjustment as soon as it is corrected. In order to apply new technologies, workers need to be trained in their operation. Training of the existing work force can meet company's needs without the expense of hiring of new personnel. Manufacturers sometimes have idle workers because work rules don't allow them to perform different tasks. It is not uncommon to find manufacturers that are not keeping up with maintenance, because the maintenance crew is busy "putting out fires"; yet other workers have time to spare. Some of these firms are even in a hiring mode, intending to introduce more skilled labor while existing personnel are under-utilized. This is particularly troublesome when the firm does not need full time help. In these cases, many companies will run overtime shifts to meet production levels. Development of Standard Operating Procedures will allow manufacturers to demystify the process/procedure and train or cross-train existing personnel to perform needed operations efficiently. Particular attention should be paid to the employee who is an "artist" or an "expert". The existence and acceptance of this practice is a guarantee of variance in production, and an obstacle to training personnel. For example, a factory that had "expert" set-up men who took as much as eight hours to get a process running acceptably. When asked what the particular settings were, they responded that there were no dials for the settings, and those settings were not prescribed, but adjusted by "feel.” After the set-up was standardized and the company conducted training courses, other workers were able to set up the process in half the time, markedly increasing the yield of the production line. Counterproductive Incentives have also been a culprit in the effort to optimize labor. Arguments about which end of the line produced a defect, and incentives that encourage an employee to keep "secrets" of production to himself/herself are common. Elimination or modification of the incentive in doubt will allow all workers to share a common goal, increased 79
quality production, and encourage sharing of successful experiences. Piece-work is a particularly insidious danger. A manufacturer of cast steel valves for the nuclear power industry had three separate operations performed on the part before checking to see if the casting was acceptable. The reason? The machinists got paid for piece-work. If these machinists had only worked on good castings, the production rate of the factory would have increased dramatically, reducing the labor cost, and therefore the overall cost of a piece. Most workers, if given the proper information and tools, would prefer to produce a quality product.
• What percentage of the cost of production is labor? Direct / Indirect? • What is the pay scale? • What is the pay premium for second and third shifts? • Do you run overtime due to the lack of skilled personnel? • What is the cost of overtime? • Is this a union shop? • Do you ever work overtime to meet production goals? Why? • Are you lacking labor in a particular skill? • Are you keeping up with preventative maintenance?
• Idle workers, machines, or tools • Ineffective production, or operations • Excessive transportation or motion (walking, etc.) • Excessive hand labor
• INSTALL AUTOMATED EQUIPMENT • ELIMINATE SHIFT WORK • ELIMINATE/REDUCE OVER TIME BY TRAINING OR CROSS-TRAINING EMPLOYEES • INTRODUCE JOB SHARING (TRAINING) • SUBCONTRACT WORK • ELIMINATE/MODIFY INCENTIVE PROGRAM • DEVELOP STANDARD OPERATING PROCEDURES TO REDUCE LABOR COSTS
Assessment Recommendation No. 12 Install Automated Glassware Packing Equipment Assessment Recommendation Summary Estimated Cost Savings = $1,109,432/yr Estimated Implementation Cost = $1,600,000 Simple Payback Period = 1.44 years (17 months)
Existing Practice and Observation Various grades (qualities) of glass are sold, with the quality depending on the customer’s standards. The following table is a breakdown of the percentage of total production for each glass quality grade at this facility during the month prior our assessment, including the percentage of bottles packaged for each grade. Selection (Grade) A+ A B+ B C+ C CTotals Percent of Sales 0.17 0.55 22.30 41.49 1.66 33.19 0.64 100% Percent Packaged 49.19 46.70 59.44 57.08 71.31 67.38 70.59 61.3%
Presently, 100% of the glassware exiting the Lehrs is manually inspected and packed. According to management personnel in the quality assurance department, glassware requiring a grade quality of “B” or lower could be packaged by automatic packaging machines--this is the method used in some other cosmetic glassware manufacturing facilities. According to the table above, about 77% of the products sold during the month prior to our assessment could have been packaged using an automatic packing machine.
The present actions of each inspector/packer include: 1) removing the glassware from the conveyor, 2) examining the glassware for small cracks by holding it in front of a light at various angles, 3) placing the good pieces in boxes for shipping and the rejected pieces back on the conveyor to be dumped onto the cullet collection piles in the basement, 4) taping or gluing the filled boxes shut, and 5) retrieving new boxes and packaging materials. Because many of the defects are very small and would be difficult to consistently and reliably detect automatically using optical sensors, 100% manual inspection is believed by management to be a “necessary evil” to ensure that only quality products are shipped to customers. However, the inspecting process occupies less than 50% of the time of an inspector/packer. Almost half of the company’s employees work in the cold room inspecting and packaging operations (289 out of 600 employees). According to management personnel in the quality assurance department, inspector/packers are assigned to each production line according to the speed of the production line. It is estimated (by management) that each person can inspect 22 to 25 pieces per minute, and the typical production line has at least 4 inspector/packers working at a time. As many as 7 inspector/packers at a time are assigned to the faster lines. Furnace #7 and the four connected production lines are used primarily to produce the high volume/lower grade (quality) products which would be best suited for automatic packing. In addition, plans have been made to increase the capacity (tons/day) of furnace #7 in the near future, making the installation of automatic packers even more attractive Recommended Action Install automatic glassware packaging machines on the Furnace #7 production lines.
Since the small nature of many of the common defects are thought to necessitate manual inspections, the value of the inspector/packer’s time should be maximized by using them primarily to inspect glassware. With a case packer installed, the workers on the conveyor line will be able to devote most of their time to the valuable inspecting process. 82
the annual cost to the company for each inspector/packer is 1. Each packaging machine will allow the re-assignment of two laborers per shift. Also. based on $40.35 x $30. each re-adjustment will require 30 minutes of a skilled operator’s time. for four shifts. The typical number of inspector/packers presently working on each production line is 4. the remaining machines should be installed. • • • 83 . only one machine should be installed initially to allow a performance evaluation and design improvement period. The average annual earnings for an inspector/packer is $30. the equivalent hourly rate of a skilled packing machine set-up technician is assumed to be $25. More than 50% of the inspector/packers’ time is presently spent performing actions associated with packaging. According to manufacturer’s literature.5 x 4 workers/line = 2 workers/line. piece shape and size. Adjustments will be necessary when the number of pieces per box.000/yr with a 35% overhead rate. personnel in the quality assurance department at the facility felt that a reduction from 7 to 3 workers on one line would be reasonable.96/hr.500/yr. This assumption is based on installing the packing machines on the lines which produce the high volume/lower quality glassware. or box size changes. This is viewed to be a conservative assumption.Anticipated Savings This analysis includes the following assumptions: • Four packaging machines will be installed. Based on previous experience with similar packaging equipment in similar applications. layers per box. There are approximately 6 shape changes per production line per month.000/yr = $40. It is assumed that a properly designed packaging machine will be capable of eliminating at least half of the present labor efforts (or nearly all of the present packaging labor).000 and. one on each of the #7 furnace production lines. and each shape change will require the packaging machine to be re-adjusted. with an overhead rate of 35%. Of course. After the initial system has been properly adjusted and has proven its worth. or 0. based on interviews with management in the quality assurance department and observations during our on-site assessment.
units = changes/month/line = packing machine set-up time per shape change. units = $/yr According to manufacturer’s information. scfm HP = power required for a centrifugal compressor to produce compressed air at 100 psig.746 kW/hp HRS = annual hours of operation. $0. units = $/yr/person = monthly shape changes per production line.23 hp/scfm K = conversion constant. achieved by installing automatic packaging equipment will be due to avoiding labor expenses which are required when the products are packaged manually. units = people/line/shift = labor required for operating a packing machine. 0. 8400 hrs/yr EDR = average cost of electric demand. units = shifts = annual cost per laborer.50 (no units) Vf = volumetric flow of air to a packing machine.MOC] where NP LE MLR NS CPL MSC ST THR MEC = number of automated packers to be installed.MSC x (12 months/yr) x ST x THR . each machine requires a maximum of 10 kW of electric heat for the hot-melt box closing system and 50 cfm of 100 psig compressed air. etc. 0. 0. The annual electric operating cost for each packing machine.39/kW-month EUR = average cost of electricity usage. manual operation of a packing machine is estimated to take 25% of a laborer’s time (for keeping the machines loaded with cardboard and glue. These savings were estimated as follows: ACS = NP x [ LE x NS x CPL .). MEC. $10. ACS. In addition. the electric heaters are on about 50% of the time.0308/kWh 84 . units = people/line/shift = number of shifts during which the packer would be used.The annual cost savings. clearing an occasional jam. units = hr/change = hourly rate for a packing machine set-up technician. During normal operation. units = $/hr = annual electric operating cost for a packing machine. may be estimated using the following equation: MEC = [ KW x UF + Vf x HP x K ] x [ EDR x (12 months/yr) + HRS x EUR ] where KW = rating of electric heaters. no units = laborer equivalence for each automatic packer (number of laborers it would take to perform the work of one automated packer). no units UF = usage fraction for electric heaters (fraction of time operating).
25)(4)(40. 85 .358/yr) ] ACS = $1.39/kW-month) + (114. and eject the packed box onto a finished goods conveyor.513/yr) ] MEC = $5.207/yr) ] = (4)[ ($277.($5.207) ] = (4)[ ($283..Substituting the appropriate values. MEC = [ (10)(0.39)(12) + (8400)(0.109.50) + (50)(0.500) .694/yr) + ($3. the estimated annual cost savings can be calculated as follows: ACS = NP x [ ( LE .($935/yr) .0308/kWh) ] = [ ($1. This additional expense has been considered and is included in the estimated implementation costs.500/yr) .746) ] x [ (10.207/yr Thus. Adjustability is required for this application due to the variety of sizes and shapes of glassware which are manufactured on each production line. NJ.10 Case packers are commonly used in the glass container and cosmetics industries and machines are available which have the capability of being used for a wide range of products.MLR) x NS x CPL .MSC x (12 months/yr) x ST x THR .MEC] = (4)[ (2 .0308) ] = [ (163 kW-month/yr)($10.064 kWh/yr)($0.(6)(12)(0. 10 Supermatic Package Machinery Inc. The conveyors which presently extend from the Lehr exits to the opening of the cullet trenches will most likely need to be replaced or supplemented by conveyors designed to properly feed the automatic packing machine.5)(25. Fairfield. organize the inspected bottles into the desired grid.23)(0. pack the glassware in the boxes in single or multiple layers.432/yr Implementation Case packers are available which can perform all of the following operations: • • • • • • construct the boxes. include corrugated spacers between the glassware.(5.96) . glue or tape the box closed. (201)575-6350.0.
about 40% of the rejects have large scale defects which would be detectable by optical inspection devices. 24.109. Each company will custom design their machinery to fit a specific customer’s needs and will test their equipment using the customer’s products before shipping the equipment to the customer. Garvey Corporation. 86 . Fairfield.4 yrs (17 months) Automatic inspection/rejection methods should also be considered when designing the new packaging and conveyor system.000.600. Savings and implementation costs for automatic inspecting have not been considered in this recommendation.432/yr) = 1. According to data obtained from the quality assurance department. 11 12 Supermatic Package Machinery Inc.000. Installation of the equipment can also be performed by technicians from the equipment vendors.600. (201)575-6350. By using a conveyor system which takes the rows of glassware exiting the Lehr and removes them in single file lines. So the installed cost per line will be about $400. requiring manual inspections only for detecting small scale defects which can’t be detected automatically. The installed cost for the conveyor system was estimated to be about $50. NJ. determine if containers are acceptable.000)/($1.000 and the total cost for installing the packaging systems on 4 production lines would be about $1. The simple payback period would be: Payback = (Imp Cost)/(Cost Savings) = ($1. This could provide additional savings by reducing the manual labor required for inspecting. based on descriptions of the existing conditions at this facility. optical inspection systems could be used to automatically : 1) reject glassware with large defects. or 2) for the products with lower quality requirements. (800)257-8581.. Installed cost of a fully adjustable case packer capable of packaging glassware in multiple layers of 12. Estimates of implementation costs were obtained from equipment manufacturers.Manufacturers of case packers11 and conveyor systems12 which are commonly used in the cosmetics industry were contacted. or 48 bottles per layer was estimated to be about $350. NJ.000. Blue Anchor. 36.
2 units/minute.704 /yr. This machine then takes the materials needed to assemble the mouthpiece of the light bulb and attaches the mouth piece to the light housing. Machine B then finishes the product and packages it for sale. the fourth worker transfers the light bulbs to the pallets and takes the pallets to the finished product storage area. machine A is periodically shut down while machine B reduces excess inventory. The first step in the assembly of the light bulbs is feeding the materials into machine A by worker number 1. When both machines are operating at full capacity. The bulbs are taken to the storage room because machine A has a higher output rate than machine B and an overflow supply of bulbs will begin to develop between the two machines. The production line is in operation for about 4992 hrs / year and machine B is in operation for all of this time.690 Simple Payback Period = 0. Machine A is in operation for about 95% of the production operation time (based on interviews and observations). The installation of the magazine will reduce labor 87 .Assessment Recommendation No.07 years (less than one month) Existing Practice and Observation Presently the process of assembling light bulbs is performed by four workers and two machines. For this reason. Machine A can operate at an output level of 5. The output from machine A is then stocked on pallets and transferred to a temporary storage area by worker 2. 13 Install Magazine Between Machines to Reduce Costs Assessment Recommendation Summary Estimated Cost Savings = $211. The linkage would consist of a magazine between the two machines that would automatically shut down the first machine when the storage area in the magazine exceeded 100 light bulbs and automatically turn it back on when there are only ten light bulbs left in the magazine. Presently. an excess of unfinished inventory is created by machine A. Recommended Action Replace the present process of transporting the light bulbs from machine A to the storage area and back to machine B by linking the two machines together.72 units/minute and machine B can operate at 5. about 5% of the bulbs received by Machine B are defective. The semi-finished products remain in this area until worker 3 transports them to machine B where they are loaded into the machine by worker 3. Estimated Implementation Cost = $14. This will compensate for the different production rates of the two pieces of machinery. Once the product is finished by machine B.
CPH = cost per hour for workers (including fringe).) x ($19.MPLA) x HRS x CPH where HRS = annual hours of operation.37 88 . ADS.2) x (4992 hrs/yr. is the savings seen from the decrease of the defect rate from the estimated present amount of 5% to about 2%.requirements of this operation by eliminating the need for the two workers who are presently required to transport the light bulbs between machines. $19. AMHS. Anticipated Savings The annual reduction of man hours savings. The annual savings from reduction of defects.47 /hr) AMHS = $194. Then that at least 80% of the defects come from either the transportation process or removing the bulbs from the machine. 5% NDR = new defect rate.560. There will also be no more need for the temporary storage area that was previously required to house unfinished bulbs. $0. 4992 hrs/yr. 1. is the reduction of two workers that are needed to work the production line. In addition. the defects which occurred from the extra packing and transportation of the bulbs will be reduced.388 /yr. 2 AMHS = (4 . This is possible due to the replacement of the 4% defects rate caused by the intermediate transportation with an estimated 1% defect rate caused by the magazine. AMHS = (MPLB . ADS = UPY x CPU x (ODR .000 bulbs ODR = old defect rate. 4 MPLA = workers per line after implementation. Workers estimated that less that one percent of the light bulbs produced by machine A are defective. 2% CPU = average value per unit (bulb). freeing that area for other uses.47 MPLB = workers per line before implementation.NDR) where UPY = units produced per year.
02) ADS = $17.+ $17. The simple payback period can be calculated with the following equation: Payback Period = Implementation cost / ACS = $14. This equipment will no longer be required. Implementation Implementation requires the design.000 bulbs/yr.0.704 Payback Period = 0. ACS = AMHS + ADS ACS = $194. and the respective costs are estimated as $3340 and $2350.316 /yr. The design and construction of the magazine can be contracted to a conveyor manufacturer company and will cost approximately $9. construction.000. The existing transportation of bulbs to the storage area and back requires equipment that needs to be fueled and maintained daily. The total annual cost savings. The installation of the magazine will require two steps: the arrangement of the machinery and the connection of the magazine.690. ACS.05 .07 years ( less than one month ) 89 .316 /yr. and installation of the magazine.ADS = (1.560. or may be used for other purposes.690 / $211.) x ($0. and can be calculated with the following equation.704 /yr. ACS = $211.37/bulb ) x (0. It should also be noted that there will be additional indeterminable savings from the reduction in transportation costs and reduction of storage space that is required.388 /yr. is then due to the sum of the reduction of man hours savings and the reduction of defects savings. Hence the total installed cost would be $14.
000 Simple Payback Period = 0. 90 . We assume that the training can be accomplished in after work hours. The sales are about $17. The product is expensively priced. We propose that the company provides this training of employees on a regular basis to keep all the operators up to date all the time. when somebody takes a sick day or other leave of absence there is enough work to be finished that it doesn't cause any problems. Recommended Action Cross train all the employees in different aspects of the manufacturing process so there is always somebody available with the skills necessary to keep the production running. thus without any loss to production but with pay to the employees.000. reflection of occasional slower production caused by the lack of trained personnel is calculated into this number) when the production has to be diverted into auxiliary work or workers are asked to go home because the key employee is missing and the job cannot be finished.000/year Estimated Implementation Cost = $10. The production is not fully automated and depends on skills of different operators or craftsmen. 14 Cross-Train Existing Personnel to Avoid Lost Time Assessment Recommendation Summary Estimated Cost Savings = $24. Discussions with the supervisor revealed that the company looses approximately 5 work days every year when employees are absent due to sick leaves or other reasons. There is only one shift operation at this time and because of special high level skills required the company is not successful in finding people for a possible second shift. Existing Practice and Observation The company cannot satisfy all demands of the market. However. There is a constant backlog on received orders because the lamps are not produced fast enough. there are days (on the average 5 a year.000. The sale volume is not very high relative to sales in dollars because the company caters to a niche market. Normally.42 years (about 5 months) Background The company is a manufacturer of luxury light fixtures.Assessment Recommendation No. Rotation of the operators should be established as a practice.
000) = 0.00/hr rate.00/hr Cost to the Company = ($50.00/hr) x (1. since that is the direct cost to the company. If we estimate the total cost of such activity as $10.42 years = (approximately 5 months) 91 .000/year Implementation There is very little cost associated with the original planning and scheduling of the training.000/yr ES = [($10.00/hr (For the purpose of this calculation we consider $50.000/day) x (5 days)] .Anticipated Savings Realized Profit = $10.4 fringe benefit) = $70.) People Involved = 13 Annual Time Allocated for Training = 1 week Number of Operators to Be Trained = 10 Cost of Training = (13 people) x (40 hours) x ($50.000. Fringe benefits will be paid regardless.($26. Implementation Cost = $10.000/day Labor Rate = $50.00/hr) = $26.000) / ($24.000 Simple Payback = ($10. we believe that it is very conservative number.000/yr) = $24.
CONCEPTS FOR PRODUCTIVITY ENHANCEMENT Part II Decreasing Cost/Piece 93 .
keep the work load more or less constant. In one day assessment it would be extremely difficult to be able to collect all the data required for detailed calculation of optimum batch sizes. sequencing of operations. Of course. however. What we would like to address here is something which can be done in one day visit. or adding a new work shift for achieving the desired output per day. In painting operations it is typically cleaning of the paint guns. The illustration of this concept is documented by the "Machine Shop Scheduling" case study. A case like that calls for either speeding up the whole production. Better sequencing of runs from light to dark color can eliminate cleaning operations during color changes. Since the lighter colors are effected by the darker ones to a large degree. the basic ideas related to scheduling in a JIT environment can be evaluated and conveyed by an assessor within the time frame given. and deliver parts quickly to their destination. As the second example of schedule changes within production we can introduce a concept of elimination of waiting for batches of products. steps like that involve hiring more people and thus are a considerable expense to the company. the cleaning operations must be performed very thoroughly and their partial elimination would lead to significant savings. Scheduling and Just-in-time are closely related. 94 . In some cases the reorganization of work schedules could be helpful. The purpose of scheduling of all production runs is to produce parts as cheaply as possible. While scheduling production runs in order to keep a constant throughput is a complicated matter beyond the scope of a one day assessment. in printing houses it would be cleaning of cylinder blankets or spray jets. we feel it is a step in the right direction. it can free up precious resources of the company.Scheduling Introduction Scheduling we want to introduce is not a scientific discipline studied by industrial engineers. If performed in all sequential operations for one part or product. if the potential profit justifies the expansion. and so on. The calculations involved also demand more time to process and in most cases extensive computer programming is a significant part of such undertakings as well. It would usually involve cases in which the company knows that the market for their product exists. which might be quite beyond a scope of one day audit. The first type of scheduling recommendations could involve better planning in cases when changeover of certain types are involved. We can use as an example painting or printing operations.
After extrusion there is a trimming operation. This example also shows that there is not a magic easy way to classify the problems of productivity since the same example could be used in the "Floor Layout" section. 95 . This ratio can also be used to analyze office work. Consequently. There are one hundred different lots to be processed and ten machinists to do the job. breaks. Of course. then our target ratios are the times that these two processes take. even 1:1000. The second ratio is speed of the process to sales rate. but waiting time is cut five times. The first ratio is production lead time to work content.. etc. we can consider a component at the next manufacturing operation. at the most in hours. As an illustration we can use an example from a plastic parts manufacturer. ninety lots are idle waiting their turn while only ten are worked on. That would mean only two job lots per machinist. We will illustrate the concept using the case from the machine shop. The ratio applies to a single part only. In other words. At this point the close relationship to traditional scheduling of production runs becomes obvious. This is not an average output rate. the lead time could be shortened to the time necessary for the process. If the trimming machine is moved to a physical proximity of the extrusion machine. down time. the lead time for the next operation is just that long. Every idle piece. which also includes setup times. we have to wait only the time which is necessary to produce that one part. JIT can be applied in between different production steps. At the shorter ratio each actual job processing takes the same amount of time as before. If we are talking about two operations within the process. instead of the sales rate of the finished final product. The ratio is 10:1 and indicates that a better scheduling of jobs is necessary. every pallet with parts waiting or being delivered long distances raises this ratio. The lot consists of 10 000 parts which have to be extruded. Trimming takes just three seconds but because of the lot arrangement it takes almost eight and a half hours before the last part is trimmed. but the actual time when the part is worked on can be counted in minutes. To make useful and quick analysis of a process it is possible to use ratio analysis. the average would be only one week if the ratio were shortened to 2:1. or. If we extend the concept. If the average job takes five weeks when the ratio is 10:1. But we can see quite commonly ratios of 1:100.Just-in-time is usually associated with lead times for a manufactured product. in other words to get the part. Sometimes the lead times are in weeks. That is ideal and for practical purposes we would be satisfied with ratios in single digits. The third ratio is number of pieces to number of work stations or operators in a line segment. the ideal ratio is 1:1.
On the other hand. melting. the ratio gives us a hint of where a significant potential for a reduction in time for the manufacture of a painted part exists. The companies should be concentrating on using a pull system (production is based on orders received). there is obviously an opportunity to shorten the bake time. The reduction might not be possible if the process cannot be modified or replaced with equally satisfying treatment but shorter in duration.? If the answer is YES. where long times involve annealing. • Do you use push or pull system in your manufacturing process? • If overhead cost is too high. Push systems (speculative production. number of shifts. where items are pushed through production) are most likely inefficient. • Identify processes or operations which you feel are more costly than they should be. A good example could be baking of enamel paints. That is not to say that we perceive such a change as trivial. such as cleaning. During those times the piece is only indirectly worked on and the lead time is long. identify these operations. why? • Does your product experience multiple handling or multiple inspections? Symptoms/Indicators Excess inventory and especially in-process inventory are good indicators that it should be possible to reduce both by better scheduling. What would be the right sequencing to eliminate these operations? • Do you have large size batch operations? • What are typical leading times for your products? ("product" could also be object for the next operation) • What is the company's operating schedule (including vacations. poor floor layout. setups etc. A lot of movement of parts using fork lifts is an indication of either bad scheduling. Questions to Ask • Do you have operations where different sequencing of job would eliminate some nonvalue added operations. The ratio differences with and without baking are enormous.There are specific manufacturing processes. Related ARs • OPTIMIZE LOT SIZES TO MINIMIZE INVENTORY CARRYING COSTS • SCHEDULING PRODUCTION RUNS TO MINIMIZE SET-UP TIMES • ADD A SECOND PRODUCTION SHIFT 96 . However. or exposure for a specific time to a specific substance. overtime)? • Ask questions about ratio indicators. or both.
The company also makes other gear sets which are sold to different gear box manufacturers but also as individual units from a catalogue. This way the batch operation is completely eliminated. It takes twelve minutes to drill and bore each gear. On the average the company processes 370 lots of gears per year. The shop processes forty gears per lot. based on the size. Since the gear which is machined right now was at one point the fortieth in the waiting line. and the operator does not have to attend the machine during those twelve minutes. which totals eight hours.Assessment Recommendation No. he can pick up the next gear from the previous operation and have it ready when the gear on the machine is finished. it. too.000. 15 Optimize Lot Sizes to Reduce Inventory Carrying Costs Assessment Recommendation Summary Estimated Cost Savings = $61. but the real machining time is only twelve. to process all forty. 480 minutes represents one shift and we certainly can say also one banking day. 97 .500. Since the boring of the gear takes twelve minutes. The company then sells the gears to A gear box manufacturer. one shift. The manufacturing of one gear consists of a hobbing operation from raw material and then drilling and boring operation for the bore. had to wait forty minutes for twelve minutes of machining.524/year Estimated Implementation Cost = None Simple Payback Period = Immediate Background The machine shop performs all machining operations for steel pinion gears. but on the average it is estimated to be $11. From that we see that the waiting time of 480 minutes is valid for all the gears. The lead time for the fortieth gear is apparently 480 minutes. The value of these forty gears varies. The sales of the company are $27. Existing Practice and Observation The company has a one week lead time for any size gear manufactured. Recommended Action The recommended action is based on the idea that in-process inventory costs the company money.000.
the savings generated will be significant. the loss is: ES = (Inventory) x (Rate of Return) ES = ($11. Simple Payback = Immediate Conclusion Although the savings are not too much in this case. Therefore.000 Since the company processes 370 lots a year and 480 minutes represent one day in terms of banking hours.000 batch is around the whole year as in-process inventory which costs the company at least the money lost to other investments. which was the most obvious and did not require any investment. The requirement is just to change the routine of the operator. On the other hand if all steps of all operations are looked at and approached in a similar fashion.Anticipated Savings Value of the batch = $11. If we consider a conservative rate of return for the company to be 10%. changes in layouts of the plant. making rework necessary for just one piece instead of many. should a problem occur.100/year Implementation There is not a direct implementation cost. an $11..000/yr) x (0. 98 .1) ES = $1. Another benefit of this approach is that each piece is inspected individually and not as a part of a batch. the corrective action can be taken immediately. etc. it is important to realize that the recommendation deals only with one case of in-process inventory.
This will allow the overall percentage of the non-production related expenses to decrease on a per mirror basis. One concern of management was the ability to maintain an acceptable production rate on the second shift and avoid internal theft while management was not there to watch over the operation. Recommended Action The recommended course of action is to add a second operating shift to the production in order to meet the excessive demand and maximize profits. The majority of workers are bussed in by the company from a neighboring city which as an abundant supply of men and women willing to work for minimum wages. The operation of a second shift will allow the company to decrease the cost per product which can increase the profit per product or allow the product to be sold by the company at a lower price to gain a larger share of the market. 99 . After production is complete the products are then packed and shipped directly to the customers. 16 Add a Second Production Shift Assessment Recommendation Summary Estimated Cost Savings = $445. The fixed cost that had is being absorbed by the production of only one shift will now be able to be split up between the to shifts.107 Simple Payback Period = less than one month Existing Practice and Observation Mirrors are purchased and shipped to the plant in crates with either a polished edge finish or raw edge finish. Estimated Implementation Cost = $9. The two main types of decoration that are used on the mirrors is silk screening and attaching pictures or designs to the back of the mirror.Assessment Recommendation No.690/yr. At this point the mirrors are either framed or decorated by a variety of methods. There will be extra management hired to supervise the operation on the second shift and additional security measures taken to deter internal theft. The majority of the manufacturing process consists of the decoration of the mirrors which has to be performed by hand. The manufacture has not been able to meet the excessive demand for his product while operating only one shift. The manufacturing process begins by cutting the mirrors into the desired shapes and sizes.
The premium costs for labor on the second shift were neglected due the amount of available labor.860/yr. can be calculated as the amount of profit generated by a second shift minus the operating costs: ATS = (TAS x PVA x APP) .450/yr. TAS = total annual sales PVA = percentage of value added to the product APP = annual percentage of profit ASC = annual cost of the night supervisor (including benefits) AGC = annual cost of the security guard (including benefits) Hence the additional profit will be.690/yr. Payback Period = 0. ATS.690/yr. which includes the purchase and installation of a walk through metal detector.107.) ATS = $445. + $34. Only one system will be required at the main entrance because that is the only entrance the employees can use. The security system will be monitored by one security guard. The total implementation cost will be $9.(ASC + AGC) where.00. Implementation The implementation of this assessment will require the addition of a night supervisor to monitor the second shift and the installation of a security system.107 / $445. The security system will cost $9.02 years (less than one month) 100 .107. The night supervisor will be required to be supervise all the operations of the second shift and maintain an acceptable production rate. Payback Period = Implementation cost / ATS = $9.5 million )( 40% )( 10% ) .($59. ATS = ( $13.Anticipated Savings The annual total benefit from the extra profit.
or unpackaging raw materials • Large volumes of raw materials or purchased components in inventory • Labor efforts spent transporting raw materials or purchased components (multiple transportations of raw materials and purchased components occur because purchased goods are not received Just-In-Time) 101 . the most likely recommendations related to purchasing will involve cases where extensive efforts handling purchased goods are observed. paying close attention to any in-house labor efforts associated with handling those materials. During the plant assessment. In this case. and inventory carrying costs. the bulk discount would have to be greater than the increased carrying costs incurred due to the requirement to house more raw materials at the manufacturing facility at one time. For the IAC program. If existing delivery schedules require significant floor space and labor efforts for handling raw materials. In these cases. Questions to Ask • How often are raw material deliveries received? • Are raw materials delivered based on the supplier’s convenience or planned needs at your facility? • Inventoried quantities and values of raw materials? • How long do raw materials or purchased components remain at your facility before they are used? Symptoms/Indicators • Large amounts of time/labor spent mixing. it may be profitable to switch to a just-in-time delivery schedule.Purchasing Introduction Improvements in raw material and component purchasing procedures can lead to significantly reduced purchasing. it may be beneficial to purchase the materials in bulk to receive volume discounting. allowing a reduction of in-house labor. in-house material handling. it may be possible for the IAC client to work with their suppliers. measuring. Finally. If significant labor efforts are spent measuring materials. it may be possible to negotiate with material suppliers to provide their products in premeasured quantities. raw material and purchased component inventories should be surveyed. negotiating delivery methods or schedules which will reduce the in-house costs. if the usage volumes for a raw material are large but deliveries are small and frequent.
Related ARs • RECEIVE RAW MATERIALS OR PURCHASED COMPONENTS ON A JUST-INTIME BASIS TO REDUCE INVENTORY CARRYING COSTS • RECEIVE RAW MATERIALS OR PURCHASED COMPONENTS ON A JUST-INTIME BASIS TO REDUCE MATERIAL HANDLING COSTS • ORDER RAW MATERIALS IN CUSTOMIZED PACKAGING TO REDUCE INHOUSE MIXING OR MATERIAL HANDLING COSTS • PURCHASE RAW MATERIALS IN BULK QUANTITIES TO OBTAIN VOLUME DISCOUNTING • SUBCONTRACT WORK TO REDUCE OVERALL COSTS OF PRODUCTION 102 .
based on your company’s demand for wood chips. Recommended Action Have the supplier deliver the wood chips according to a fixed schedule. Estimated Payback Period = Immediate Payback Existing Practice and Observation The plant receives deliveries of wood chips by truck from the vendor according to the vendor’s schedule. 17 Schedule Wood Chip Deliveries According to Demand Assessment Recommendation Summary Estimated Cost Savings = $28. It takes the blower approximately 1.768 / yr. The storage shed can still be used as a buffer so if there are any problems with the shipments the extra wood chips could be used until the deliveries are resumed. The deliveries of wood chips are often made before the pit is able to accommodate them. creating backups in the delivery schedule. The level of the wood chips must be kept within a certain range in order to insure that the trucks are able to unload the chips into the pit and the cyclone is able to transport the wood chips into the factory. When the storage pit becomes over-filled the trucks that are making the deliveries are unable to unload into the pit. Savings on labor and energy costs will result. the cyclone is unable to pull the chips out of the pit and production must be halted. This operation requires about 15 hours per week.Assessment Recommendation No. The wood chips are dumped into the storage pit until the cyclone is ready to pull them out of the pit and transport them into the factory for use in the process. requiring some of the chips to be removed from the pit. This will eliminate the present need to have the wood chips moved from the storage pit to the storage shed and back to the storage pit. The wood chips are then moved back into the pit by an operator with a front-end loader. If the level of the wood chips gets too low. this is done three times a day. This task is performed by a 90 hp blower which forces the chips up through a silo and into a storage shed. The chips are kept in the storage shed until the level in the pit is low enough. On average.5 hours to remove enough wood chips from the storage pit when it is full. 103 .
) ($0. The payback will be immediate. + $4. Implementation and Simple Payback Since the supplier is heavily dependent on your business and can be persuaded to begin deliveries according to your schedule.05 / kWh) AES = $4.Anticipated Savings The savings from the reduction in man hours. fringe) WPY = weeks per year of plant operation MHS = (15 hr/week) x ($31. ATS = $28.) MHS =$24.078 / yr.746 kw/hp) (4. ATS.5 hr/day) (360 days/yr. needed to move the wood chips from the storage shed to the storage pit can be calculated using the following formula.690 / yr. The annual total savings. there will be no implementation cost for this recommendation.65 /hr) x ( 52 weeks/ yr. The annual electricity savings.768 / yr. MHS. MHS = HPW x CPO x WPY HPW = number of hours per week spent moving wood chips CPO = cost per hour of the person moving the chips (incl. ATS = MHS + AES ATS = $24. 104 .75) (.690 / yr. AES.078 / yr. can be determined as follows: AES = HPR x AEL x HPC x HPD x DPY x CPH HPR = The horse power rating of the blower AEL = The average electric load on the motor HPC = The horse power conversion into kilo watts HPD = The average hours per day the blower operates DPY = days per year of plant operation CPH = cost of electricity usage AES = (90 hp) (. can be determined using the following equation.
The company estimates that approximately two percent of the raw materials are wasted in the combination of processes that are necessary before the materials are placed in the mixers. MHS. Additional time is spent cleaning the area that is used for measuring and transporting the materials. There is a team devoted to processing the materials as they arrive and breaking down the packages so the materials can be measured out and sent to the mixers. This will eliminate the need to measure the raw materials in-house. Labor costs will be reduced by eliminating the need to weigh out the materials into proper amounts. allowing the pre-measured packages to be removed from the shipping containers and directly added into the mixers. Recommended Action Require the suppliers to package the materials in immediately useful quantities and use soluble packaging. can be determined using the following equation: MHS = (RMH + TSC x NOE) x AHR x DPY 105 . Presently workers are given fifteen minutes to clean themselves off every time they are finished a shift or are taking a scheduled break. Spillage of the raw materials which occurs during measurement and transportation to the mixers will be eliminated.Assessment Recommendation No. Once the materials are separated into the proper amounts they are all combined in the mixers. If the new type of packaging is implemented then the receiving labor requirements could be reduced to two employees. Savings of several types will result. Anticipated Savings The man hour savings. The soluble packaging will dissolve once the reactions in the mixers begin to take place. Estimated Payback Period = Immediate Existing Practice and Observation Your company presently receives materials from suppliers in standard amounts and divides the materials into useful quantities so the ingredients can be combined to form the right compounds for the process. 18 Purchase Materials from Supplier in Customized Packaging Assessment Recommendation Summary Estimated Cost savings = $24.945/yr. There are presently three employees working in receiving and a large percentage of their time is spent handling the raw materials.
OCI.) .445 / yr.500 / yr. which must be considered with the cost savings.450.OCI ATS = ($68.) MHS = $68.2%) OCI = $43. x (5% . the payback will be immediate.RMH = reduced man-hours per day TSC = time the employees are given to clean materials off per day NOE = number of employees who work with materials AHR = hourly rate for employees in receiving (including fringe) DPY = number of days per year the operation runs MHS = (8 hrs/day + 0.5 hrs/day x 2 employees) x ($29. no implementation costs will be associated with this recommendation. The annual total savings. 106 . ATS.) ATS = $24. This will be slightly off-set by the 2% reduction in the amount of wasted materials achieved by using the customized packages. The net annual increase in the raw material cost will be: OCI = AMC x (PCP .SWM) AMC = The total annual cost for raw materials PCP = The premium percentage paid for packaging SWM = The percentage savings of material wasted OCI = $1.945 / yr.000/yr.25/hr) x (260 day/yr.445/yr. will be: ATS = MHS .500 / yr. Implementation Aside from the cost premium for the customized packaging. A premium of 5% will need to be paid to the supplier in order to have the materials packaged as requested. Once implemented.($43. There will be an annual increase in operating cost.
The gaylords are stacked 3 high and are at 16 sq. When using nine gaylords per day.ft.ft.Assessment Recommendation No.000 Simple Payback Period = 0. then loaded into the material hoppers. The total warehouse space needed is 480 sq. Approximately nine gaylords are used per day. the company receives their raw polystyrene pellets in gaylords. and will also reduce the warehousing costs associated with these raw materials. allowing bulk delivery discounts to be obtained. The cost of the warehouse is $0. Recommended Action The recommended action is to install an adjacent outdoor silo to store the polystyrene pellets. ft. There will only need to be one delivery to the silo every month. 107 . 1050 hours are spent in the handling of the gaylords. The company runs on a 350 day per year work cycle. per month. assuming a labor rate of $13.50/hr (based on $20.000/yr plus 35% for fringes). and remove the contents of a gaylord. open.6 years (7 months) Existing Practice and Observation Currently.23/sq. then delivered to the production facility. This will greatly reduce the present polystyrene purchase and handling costs.082/yr Estimated Implementation Cost = $100.325. per skid.175 per year in labor costs. Anticipated Savings An average of nine gaylords are used per day. At any given time the company has about 90 gaylords stored in the warehouse. At the production facility. Therefore. The company also leases a remote warehouse for storage of raw materials and finished goods. Gaylords are temporarily stored in the remote warehouse. This translates into about $14. It takes approximately twenty minutes to transport. the gaylords are transported to the raw materials processing area by means of a forklift. 19 Install Polystyrene Pellet Storage Silo and Receive Bulk Delivery Discount Assessment Recommendation Summary Estimated Cost Savings = $175. aerated. The rent paid every year for this amount of warehouse space is $1. three hours are spent handling the gaylords.
082/yr Therefore..0006 per silo.000 lbs. The cost for all parts. the cost savings per year (CS) can be estimated as: CS = WS + LC + TC where. It is $0. Each gaylord is 1000 lbs. Net Cost Savings = CS .. or $1. Polystyrenics Div. NJ 108 . Therefore.325/yr + $14. and installation is $50.000/yr CS = $177.500 per month or $162. diameter by 60 ft. These operation costs (OC) would be subtracted from the cost savings.418 = $175. 5 6 Monsato Corp. the total cost savings will pay for the implementation costs in approximately 7 months.175/yr + $162.500/yr . About 270 gaylords were used per month. of material. Operation cost for the silos will be approximately 10% of the previous labor cost..OC = $177.500/yr Implementation It is recommended that two 12 ft. A nominal value of $1. Universal Dynamics Inc.05 5 less per lb.418 per year.05 cheaper per lb. the savings in transportation were $13. high silos be installed.000 per year.$2. and at $0. WC = Warehouse Cost LC = Labor Cost TC = Transportation Cost CS = $1.. or $100. A silo this size can hold 100.000 total.There is also the added benefit of a lower price for the transportation via bulk tanker trucks as opposed to transport with gaylords as a medium. This would mean that the company would receive only one delivery of material per month via tanker truck.000/yr is estimated for silo maintenance. to transport by way of tanker truck.
This is why it is difficult to assign a truly accurate value of burden to each item produced.00 for every dollar of direct labor cost. water. etc. e. light. The most common are burden and overhead. • Utilities (heat. and depreciation • Administration(sales. • Factory overhead costs • General administrative and marketing costs • Profit In cost accounting the overhead is frequently everything mentioned above except direct labor and profit. maintenance • Taxes.000 less indirect manufacturing expense. In order to properly judge the savings involved in "downsizing. The selling price of a widget could be broken down into the sum of: • Direct cost of labor and material. medical insurance. It is best for our purposes to keep the two separate and look for reductions of direct labor charges or indirect burden charges and calculate the savings separately. insurance. and shipping. etc. The rate is usually predetermined by the accountants. 109 . etc.000 less in direct labor cost than the other it will also involve $150. Keep in mind that the employer must match the employees contribution to social security and Medicare and may pay for vacation time.Burden Analysis Introduction Indirect expense of a manufacturing organization is called by various short names. crane operators. Some parts of overhead vary with production rates and some do not. • Purchasing. rentals. clerical employees. receiving.) . It does not follow that if one of two alternative new machines involves $50.g. inspectors. profit sharing. A wide variety of items are included and could be made up of the sum of: • Salaries and wages of foremen. retirement plans.” we would like to know the fringe costs of labor. and management) and marketing. As rule of thumb we can estimate this to be about 40% if the company can't provide a better number. technical. a product is charged $3. if the burden rate is 300%.
Part of our increased agenda is to look at those parts of burden which we have hitherto ignored but which might very well constitute the difference between an organization making a profit and one headed for bankruptcy and shut down. or demolish dilapidated facilities) Symptoms/Indicators • Large unused areas on the factory floor • Using two nearby buildings • Empty or unused buildings on the property • Large equipment "graveyards" on the property Related ARs • REDUCE COST OF BUILDING PROPERTY • COMBINE FACILITIES INTO ONE AND ELIMINATE ASSOCIATED COSTS WITH THE BUILDING WHICH HAS BEEN ABANDONED • TEAR DOWN BUILDING ON PROPERTY TO REDUCE TAXES. it may be economic to scrap junk and use the freed space. Questions to Ask • Is new construction planned? How much and why? • Do you manufacture or store goods in any other building nearby? • Would you be able or want to have a rent paying tenant occupying any portion of your building complex. • Do you place any value on equipment or facilities which seem to be "junk"? (If not.) RENT OUT UNUSED SPACE B. AND UTILITY COST • FREE UP SPACE IN BUILDING TO: A.We have obviously been involved in calculating reductions in burden since the inception of the EADC program. INSURANCE. as first reduction of energy consumption and more recently reduction of waste generation are direct reductions of burden.) AVOID CONSTRUCTION COSTS 110 .
The main location houses the offices. 111 . on average. This will relieve some of the burden on the company by eliminating the second building's expenses as well as save in the time that is lost in the commute between the two locations. will be the reduction in rent that the company will need to pay because of the termination of the 15. fifteen minutes. There is a significant number of personnel that must commute between the two locations on an every day basis. There is a large portion of the main building that is not being used efficiently.497 Simple Payback Period = 0.000 ft2 building.53 year (6 months) Existing Practice and Observation The daily operation of the company are divided into two stages that are performed in two separate manufacturing locations.697/yr. Anticipated Benefits The total annual savings of rent. warehousing and. some of manufacturing. 20 Condense Operation Into One Building Assessment Recommendation Summary Estimated Cost Savings = $123.Assessment Recommendation No. Estimated Implementation Cost = $65. This area is mainly used to store excess inventory and out of date products. In addition it takes time to have products transported between locations. ARS = TAR x ARR where. Recommended Action The recommended course of action is to create room in the main location and move the operations from the auxiliary building into the main building. There is a significant amount of space in the main building that is being under-utilized and is believed to be able to be reorganized and moved to the main storage area. ARS. The auxiliary location is approximately one fourth the size of the main location and is only used for manufacturing. The locations are approximately three miles apart and the travel time between them is.
AMS = TTC x NPC x HRC x TYC x DWY where. ARS = 15.000 ft 2 x $5. can be contributed to the elimination of the need to commute between the two locations is estimated as. would be from the elimination of trucking costs that are presently necessary to transport the unfinished products from the main location to the second building and back again to the main location.500 / yr.25hrs/trip)(7 workers)($24. AST = CPT x TPD x DPY where. CPT = cost per trip for truck TPD = trips per day that are made DPY = days per year that trucks run 112 . AMS = (0. ARS = $76.917 / year The annual trucking savings. AMS.10 /ft2 / yr. AST.65 /hr)(2 trips/day)(312 days/year) AMS = $26.TAR = total area rented ARR = area rental rate hence the savings from rental is. TTC = time it takes to commute NPC = number of people that have to commute HRC = average hourly rate for the people commuting TYC = number of times a day to make trip DWY = number of days worked per year hence the savings from commuting is. The annual savings of man hours.
53 years ( approx. six months) 113 .500/yr.280/yr.) ATS = $123.) + ($20. The total implementation cost for the recommendation will be $65. AST = ($65. The production will be shut down for one week in order to make the necessary movements from the auxiliary warehouse to the main warehouse.697/yr.497 ) / ($123. There will be one hundred man-hours allotted at a rate of $36.) Payback Period = 0.230.97/hr to produce an organization cost of $3697.917/yr. There will be twenty-two pieces of machinery ranging from three tons to two hundred pounds that will need to be moved at a total cost of $17. The lost production will cost approximately one week of the total annual sales which amounts to $44. Implementation The Implementation will require moving of all the essentials from the auxiliary building to the main building as well as the reorganization of the main building's storage areas. A moving company will be contracted to move the operations from the auxiliary building to the main building.) AST = $20.697/yr.00/trip)(1 trip/day)(312 days/ yr.300. To reorganize the storage areas the use of in-house personnel will be utilized and will require overtime pay. It should be noted that if the move is scheduled then it might be possible to have the employees take one week of their vacation during this period to avoid additional down time. The annual total savings. There will also be a production down time that needs to be accounted for. Payback Period = (implementation cost)/ ATS = ($65.497. are : ATS = ARS + AMS + AST ATS = ($76.280 / yr.hence the savings from trucking are. ATS.) + ($26.
21 Demolish Building to Reduce Tax & Insurance Fees Assessment Recommendation Summary Estimated Cost Savings = $54. Recommended Action The recommended action is to demolish the 1948 warehouse and move anything of value to either of the adjacent warehouses that are at less than maximum capacity.Society of Industrial and Office Realors.600/yr Estimated Implementation = $118. The additions were made to the original plant to accommodate expanded production and increase the available storage space. The construction quality of the additions is not that of the main building and in recent years some of the additions have been neglected due to their diminishing requirements. AST. AST = TPA x TAD where. There is one building that is no longer of any real use and is at the point were repairs will cost more than the building is worth. for the building that will be demolished can be determined using. Washington. 114 . 131996 Comparative Statistics of Industrail and Office Real Estate Markets. The building is assessed as a development property and the last reassessment was performed before the building began to deteriorate.2 years (26 months) Existing Practice and Observation The company has several buildings that have been constructed since the original factory was established. D.000 Simple Payback Period = 2. Anticipated Savings The annual savings from the elimination of the taxes.Assessment Recommendation No. In demolishing the building the annual taxes and insurance for the building will be eliminated. TPA = The tax rate per area13 TAD = The total area being demolished Hence the savings from taxes are.C.
S.600 / yr ) + ( $3000 / yr ) ATS = $54. Any salvage value of material will be incorporated into the cost of the disposal of the material. The annual savings from the insurance.AST = ($1.000 per year The annual total savings. AIS = IRA x TAD where. MA 15Means 115 . the demolition of the building will cost approximately $90.000 ft2 ) AST = $51. Kingston. The demolition costs are determined by the volume of the building. and removal and disposal of the construction materials. IRA = The insurance rate per square foot14 TAD = The total area being demolished Hence the savings from the insurance is.000 ft 3 . 360.000 ft2 ) AIS = $3.21 ft3 . ) x ( 30. this is the amount of insurance that is being paid to keep fire and liability insurance on the building. AIS = ( $0. R. The disposal of the material consists of dump charges that is determined by the type of material and the volume (cubic yards) being disposed. 15. Construction Company. AIS. and the cost for the type of building (steel framed). It can be determined using. is the savings per year from the demolition of the building and is comprised of the savings from taxes and the savings from insurance.600 / yr.600 / yr Implementation The implementation requires demolishing the warehouse. ATS = AST + AIS ATS = ( $51. ATS. $0. The demolition also includes the loading and hauling of the rubbish hence.72 /ft2 /yr. It is estimated that there will 14Based on information obtained from Comparative Statistics of Industrail and Office Real Estate Markets Repair and Remodeling Cost Data 15th Annual Edition.10 / ft2 /yr.) x ( 30.000.
The total dump charges will be $28.600/yr ) Payback Period = 2.00 per cubic yard16.000 resulting in an implementation cost of $118.be 800 yd3 of material that needs to be dumped at a rate of $35. Payback Period = Implementation cost / ATS = ( $118.000 ) / ( $54.000.2 years ( 26 months) 16Based on information obtianed from the Means repair and remodeling cost data 116 .
it is desirable to minimize inventories of all types. 117 . the most notable of which are: • Investment costs (time value of money tied up in inventoried goods) • Cost of product damage or spoilage • Cost of product obsolescence • Cost of storage space • Handling & transportation (in-house) Although the magnitudes of each of the above costs may vary from one manufacturer to the next. the carrying costs can exceed the profits gained from the eventual sale of the products and a net loss will result. it is easy to recognize that each of the costs will continue to grow in time.Inventory Introduction There are four major types of inventory in industrial facilities: • Raw materials • Purchased components • Work-in-progress • Finished goods Associated with each of the above types of inventoried goods are carrying costs . The Japanese believe that inventory is one of the greatest forms of waste and make every effort to achieve production systems which don’t require it. process-related problems which should be investigated further (listed above). In fact. For this reason. Once the root cause for excess inventories is identified and addressed. if inventoried periods are long enough. needed to compensate for deficiencies in the manufacturing process such as: • Long set-up times • Frequent machine breakdowns • Lack of predictive/preventive maintenance • Excessive manufacturing lead times (due to process bottle-necks or poor process layout) • Defective raw materials or purchased components The most important reason to consider inventory levels may be for use as an indicator of other. This is in contrast to many traditional American and European production systems which have viewed inventory as a necessary evil.
if long set-up times are identified as the cause of large finished-goods inventories in a manufacturing facility and a recommendation is made which will reduce the set-up times significantly. this will be an unattainable goal because they may lack the buying power and production volumes necessary to achieve such a system. In many cases. order lead time. product type. Large-scale manufacturers have the power to dictate just-in-time deliveries by their suppliers and the resources to realistically consider continuous processing methods and just-in-time manufacturing. Even though the size of the manufacturers served by the IAC program may limit the extent to which inventories can be realistically reduced. For example. For most of the small. the ideal inventory situation is: i) to stock only the raw materials and purchased components which are immediately needed. In terms of minimizing inventory carrying costs. Such investigations may lead to 118 . Minimal raw material inventories are achieved by requiring material suppliers to provide Just-In-Time deliveries. the principals and importance of inventory reduction should be recognized and pursued in all practical opportunities. To be economical. Zero (or minimized) in-process inventories may be achieved through the use of continuous processing systems. product variety. finished goods inventories can be nearly eliminated by using a Just-In-Time production system--scheduling production lots based on the immediately required orders. the annual savings could consist of: i) reduced production downtime. the reasons for the manufacturer’s perceived need for large inventories should be investigated. This may result in the storage of large supplies of finished goods to ensure timely deliveries and customer satisfaction. many factors (production volumes. etc. Finally. supplier scheduling.reducing inventory carrying costs may be shown as a secondary benefit for solving the original problem.to medium-sized manufacturers served through the IAC program. Where inventory levels are found to be excessive. where the product flows continuously from one process to the next until completion. ii) to have zero in-process inventory. and ii) reduced inventory carrying costs. manufacturers served by the IAC program will be on the “receiving end” of just-in-time mandates and will be required to provide just-in-time deliveries to their customers. and iii) to only produce finished goods in the amount that they are immediately needed. seasonality of production.) aside from inventory levels affect the practicality of all three of the above mentioned concepts. Obviously. very large raw material volumes are normally required (to minimize transportation costs) and suppliers must be able to reliably deliver all needed materials upon short notice (or raw material needs must be well known in advance of the delivery date).
Questions to Ask • Average value and quantity of each type of inventory (raw materials. improve maintenance or establish predictive maintenance procedures. etc. what are the present average manufacturing lead times for the products whose inefficient production requires the maintaining of excess inventory? Symptoms/Indicators • Physical observation of large inventories • Long set-up times • Frequent equipment downtime • High defect rates • Lack of a preventive maintenance program Related ARs • MINIMIZE INVENTORY TO REDUCE INVENTORY CARRYING COSTS • MINIMIZE INVENTORY AND OVERPRODUCTION TO REDUCE INVENTORY “SPOILAGE” • REGAIN PARTIAL VALUE OF INVENTORY BY RECYCLING OR SELLING AS SCRAP NOTE: Inventory reductions and the resulting reduced carrying costs should be considered as a secondary benefit achieved by reducing set-up times or machine breakdowns. in-process products. develop standardized procedures. reducing/eliminating process bottlenecks. modify floor layouts to reduce production lead times. purchased components. buy new equipment. improving floor layout. improving maintenance practices. why is that excess inventory needed? • If excess inventories are needed because of some process-related inefficiency or problem.recommendations to: reduce process bottlenecks. 119 . reducing overproduction. finished goods)? • How much floor space is used for each type of inventory? What is the assigned value (if any) of that floor space ($/ft2/yr)? • If it is determined that there is excess inventory of some type. shorten set-up times. etc.
22 Eliminate Old Stock and Modify Inventory Control Assessment Recommendation Summary One-time Savings: Estimated Energy Usage Savings = 1. it was noticed that a large amount of the existing inventory is very old.640 Simple Payback Period = 0. Interviews with plant management revealed that a significant percentage of the existing inventory is not sellable because it is either out-of-date. According to our observations and conversations with facility personnel. It is estimated that your company has the equivalent of one month's production in stock.Assessment Recommendation No.114/yr Total Estimated Continued Cost Savings = $23.593 MMBtu Estimated Energy Cost Savings = $5.459.027 Continued Savings: Capital Investment Savings = $2. or otherwise “spoiled.838 lb. however.968/yr Estimated Implementation Cost = $9.284 Total Estimated One-time Cost Savings = $19. all of the products are not sold. Since there has been no established procedure for purging the inventory of out-of-date products. glassware is often produced in lots much larger than the existing order with the hope that the customer will order another shipment of the same product in the future. Estimated Raw Material Cost Savings = $13. Boxes containing products as old as 8 years were found.743 Estimated Raw Material Savings = 1. damaged.854/yr Cost Benefit from Reclaimed Floor Space = $21.” Much of this stock appears to have been grouped together when the newer inventory system was 120 . Due to the long production line set-up times. Often. these items have accumulated over the years and now occupy a significant amount of warehousing space. or has become misplaced due to improper packaging which occurred when batch quantities were over-produced. about one-quarter of the finished goods in the warehouse are out-of-date.4 years (5 months) Existing Practice and Observation During our assessment. damaged. or has been damaged.
Figure #1: Outdated Inventory in Newer Warehouse 121 .= out dated stock = good stock AR#22.
/ton)]/12 = (63.851 tons) x (2000 lb. Figure 1). Anticipated Savings The existing inventory is estimated as the equivalent of one month’s production: Existing Inventory = (Annual Production) / (12) = [(31. 1989.702.308. A procedure should be established to identify inventoried products which have become out-dated and have no chance of being sold.000 lb. inventory is tagged with customer and date and inventoried in "rows" in the warehouse. but some is also in the newer warehouse (shown in AR#22. leaving out-of-date inventory in entire rows or especially at the back end of rows. Once the glassware becomes out-dated.000 ft2 of cleared floor space which should be either: 1) leased to an outside organization to provide a new source of revenue. 17 In addition. 18 17 18 National Cleaner Production Database Office of Technology Assessment.)/12 = 5. and instituting new accounting methods for the inventory in the newer warehouse. Recommended Action Reduce inventory by immediately re-stocking or disposing of old. energy savings will also result--about 1.500 lb. Using cullet to produce glass allows the avoided use of new raw materials. Only inventory to be shipped is pulled from rows. or otherwise “spoiled” inventory. The previous actions will result in approximately 9.implemented. Currently. We estimate that one-quarter of the existing inventory is out-of-date and could be used as cullet. because it requires less heat to melt cullet than it does to make glass from virgin raw materials. Facing America's Trash: What Next for Municipal Solid Waste 122 . resulting in a cost savings on raw material purchases--it requires 10% more virgin raw materials (by weight) to produce a pound of glass as compared to re-melting cullet. or 2) used to offset a portion of the construction costs for planned expansions. it should be used as cullet (clear glass) or sold as scrap (colored glass). damaged.200 BTU per pound of glass produced is conserved by using cullet instead of raw materials.
125 lb. raw mat’ls/lb.125 lb.1 lb.) x (1200 Btu/lb. .593 MMBtu) x (0. the energy cost savings would be: Energy Cost Savings = (Energy Savings) x (% Gas Heat) x (Cost of Gas) + . .593 MMBtu) x (0. .838 lb. the total one-time cost savings achieved by purging your inventory of out-of-date stock and using it as cullet would be: Total One-time Savings = Raw Material Cost Savings + Energy Cost Savings Total One-time Savings = $13.284 The energy savings would be: Energy Savings = (1.743 = $19. . .327. cullet) = 1.963 Total Reduction in Raw Material Cost (RM) = $13.838 lb.423 10% soda ash = 1.) x (10-6 MMBtu/Btu) Energy Savings = 1. + (1.378/yr. + (Energy Savings) x (% Electric) x (Cost of Electricity Usage) = (1. 123 . x 0. cullet) x (1.459.459.10 x $68.85) x ($2. resulting in a raw material savings of: (1.125 lb.838 lb.155) Energy Cost Savings = $5.The amount of cullet obtained from out-of-date inventory is estimated as one-quarter of the existing stock.02/MMBtu) Energy Cost Savings = ($3.00/ton x 1 ton/2000 lb = $1.327.459.027)/(8 years) = $2.65/MMBtu) + .327..308. then the estimated annual savings achieved by re-cycling out-of-date glassware would be about ($19.838 lb.027 The above savings is thought of as a one-time savings because improved inventory methods will prevent future build-ups of out-of-date inventories.459.15 x $13.15) x ($9. or 5.898 15% lime = 1. / 4 = 1.75 x $12. The corresponding cost savings would be: 75% sand = 1. . x 0.500 lb. .593 MMBtu Since about 15% of the heat for the furnaces is electric heat and 85% is from natural gas.60/ton x 1 ton/2000 lb = $6.00/ton x 1 ton/2000 lb = $4. If one assumes that the existing out-of-date inventories were built up over a period of 8 years. .588) + ($2.743 Hence. x 0. .284 + $5. .
00/hr + 35% fringe) = $10.750/yr.743) x (0.75/ft2/yr. Although this space may be viewed as having no value (because it is owned by the company). If invested elsewhere in the company. however. Washington.C. the value of the out-of-date products can be viewed as “idle” capital. this space has a revenue producing potential of (9.While sitting in inventory.25-$4. According to statistics published by the Society of Industrial and Office Realtors19.75/ft2/yr) = $33.000 ft2) x ($3.636/yr NOTE: The above costs may not be as high if the space is leased for non-warehousing purposes.15/yr) Reclaimed Capital Earnings = $2.000 ft2 in size are in the range of $3. Society of Industrial and Office Realtors. the net earnings would be $33. 124 . such as expanded production operations or as leasable space.$12.) to perform the functions of the rental venture.00/hr + 35% fringe) = $2.. Labor = 10 hr/week x 52 weeks/yr x ($15.854/yr The warehousing space used to store out-of-date goods is essentially wasted space at the present time.750/yr .50/ft2/yr and are in moderate shortage.106/yr Total Costs = $12. Operating Cost It is estimated that it would require an additional 10 hours/week of manpower (warehouse person. p. there would probably be a one-time facility renovation cost in that case.000 to 20. Subtracting the annual operating costs for maintaining this space as a warehouse (shown below). shipping clerk.15/yr) = ($19. In this light.284 + $5. 19 1996 Comparative Statistics of Industrial and Office Real Estate Markets. D. purging the out-of-date glassware will make the space available for other uses. Using a leasing value of $3. the space does have tangible value and should be considered as a significant benefit which will result from implementing this recommendation. gross lease prices in your company’s geographical area for warehousing spaces in the range of 5.636/yr = $21. It is not necessary to insure other client’s property.114/yr.027) x (0.46. this capital would be worth (assuming a rate of return of 15%/yr): Reclaimed Capital Earnings = (Value of Out-of-Date Inventory) x (15%/yr) = (Raw Material Cost Savings + Energy Cost Savings) x (15%/yr) = ($13. nor would there be any municipal tax consequences. etc.530/yr Administrative Costs = 2 hr/wk x 52 wk/yr x ($15.
640 Simple Payback* = $9. An alternative scheme would be to use present personnel. 125 .640 / ($23.00/hr + 35%) for 80 hours = $3240 2 outside hires @ $40.968/yr) = 0.00/hr for 80 hours = $6400 Total labor = $9.4 years (5 months) * NOTE: The above payback calculation neglects the one-time SAVINGS of $19.Implementation Costs The cost to implement this recommendation include: 1) clean-up of old inventory 2) modification of your present inventory system to identify out-of-date goods 3) preparing the reclaimed space for rental purposes Cost to clear the area is estimated as using existing personnel and hiring outside help for two weeks. labor = 2 inside people @ ($15.027. if job rules and available personnel allow.
with the products moving through the factory. This economizes on the amount of inprocess inventory. paint booths in another. This strategy is used when there is a lot of variety in the product and/or the demand is unpredictable. Low quantity producers. and the work force skilled. The other type of small production uses a cell layout. One type of small quantity layout is process oriented. and minimizes handling by reducing lead time. and the demand is predictable. lathes are in one area. the disadvantage is much moving and handling. and by the quantity produced. particularly if it does not have a direct cost. 127 . they do not assign any value to wasted space.000 parts at a time to the printing area. Most manufacturers did not design the layout you see today. Equipment is designed so that similar products can be made (or assembled) on the same machinery without significant modification to the machines. Equipment is somewhat specialized. The product is routed through departments in the order of the process required. inventory or labor. This is characterized by longer production runs. produce small quantities of specialized and customized products. usually on conveyors. and the workstations and workers located next to the line. Typically. This is accomplished by eliminating or reducing wasted motion. A common practice by plant management over the years has been to expand into all available space. The equipment is general purpose. The facility is laid out in departments. but rather they "grew" into it. the product can be produced in batches.Floor Layout Introduction Opportunities in modifying floor layout involve saving time. or changing sizes. since equipment changeover is time consuming. where equipment is consolidated by type. High quantity production is generally set up in flow line layout. space. or non-value added operations. or job shops. Workstations are arranged to manufacture a "family" of products simply by adding or eliminating steps. Floor layouts will vary depending on the number of different products made. even constructing or leasing new buildings rather than maximizing the existing floor layout. The final products or assemblies are often made to order. frequently repeated. and orders are usually made to replenish inventory. One example of modifying a floor layout to reduce in-process inventory involved a manufacturer of plastic parts that moved batches of 10. If the product varieties are few. While this layout allows for flexibility. Many factories will be a mixture of these three types of layouts.
a manufacturing lead time of 10. lease or own the facility (or another)? (cost $/ft2 /yr) • Do you have any plans for expansion? • How do you account for the cost of space? (cost $/ft2 /yr) • How many different products do you make? • What is the lead time of the product/process? Indicators / Symptoms • Excess Inventory (raw material. finished goods) • Unnecessary motion • Excessive transportation within the plant • Duplication (two conveyors where one would do) Related ARs • MODIFY EQUIPMENT LAYOUT TO REDUCE MOTION OR TRANSPORTATION • RELOCATE DEPARTMENT (REPAIR SHOP.Printing took only one minute. WATER. This layout modification also eliminated the expense of movement by forklift. Questions to Ask • Do you rent. ELECTRICITY) TO REDUCE TIME SPENT MOVING PRODUCT OR TOOLS • CLEAR EQUIPMENT GRAVEYARD TO MAKE USEFUL SPACE • CONSOLIDATE PRODUCTION AREA TO CREATE WAREHOUSE SPACE 128 . reducing the lead time to less than 5 to one. SHIPPING) TO REDUCE TRANSPORTATION TIME • VERTICALLY WAREHOUSE THE FINISHED PRODUCT (OR USE ROBOTICS) TO REDUCE TRANSPORTATION AND/OR MAXIMIZE FLOOR SPACE • INSTALL DISTRIBUTION SYSTEM TO MOVE RAW MATERIALS (OR WASTE) TO REDUCE TIME ASSOCIATED WITH INDIVIDUAL PICK-UP AREAS • DISTRIBUTE UTILITIES (AIR. It was possible to move the extruder next to the printer. in-process.000 to one.
.000 to 60.C.400 ft2) x ($4.46. D. Recommended Action Clear warehouse #3 and rent it to an outside organization. 23 Clear and Rent an Existing Warehouse Assessment Recommendation Summary Estimated Cost Savings = $125. separating all machinery or materials that are salvageable and moving them to other warehouses. p. Estimated Implementation Cost = $38.400/yr. Anticipated Benefits According to statistics published by the Society of Industrial and Office Realtors20.000 ft2 in size are in the range of $4.Assessment Recommendation No. gross lease prices in your company’s geographical area for warehousing spaces in the range of 20. 20 1996 Comparative Statistics of Industrial and Office Real Estate Markets. Using a leasing value of $4.000 Simple Payback Period = 0. A large portion of the machinery in the warehouse is no longer worth repairing and is considered unsalvageable. These are costs that your company is absorbing and little to no benefits are received. It is believed.3 years (4 months) Existing Practice and Observation Warehouse #3 is presently being used for the storage of out-of-date machinery and unusable material. There is ample room in other warehouses to store the machinery and materials that are still valuable to the company. The rest of the equipment and materials that have no value can be hauled to the dump.00-$5.50/ft2/yr and are in moderate shortage. Washington.400/yr. Society of Industrial and Office Realtors.75/ft2/yr) = $125. that more than three-quarters of the objects that are presently being stored in the warehouse are of no future use. by management. this space has a revenue producing potential of (26. The warehouse has approximately 26. 129 .400 ft2 of usable space and a private entrance. It is important that a large portion of what is presently in the warehouse be permanently disposed of in order to avoid this problem from occurring in another place. Presently it is insured and annual taxes are paid on the original assessed value of the building.75/ft2/yr.
Means Construction Company. and dumped at the nearest trash site.S.)] = $250 The total implementation costs will be $38. hauled. resulting in a total removal cost of $38. The price that is paid for the metal varies from $2.50 per yd3 of rubbish21.Implementation Implementation requires the removal of the unusable materials and salvage of the scrap machines. the 5 tons of scrap will return: (5 tons) x (2000 lb/ton) x [($2. The rubbish will have to be loaded.50 per yd3 of rubbish while the dump charge will be $30 per yd3 at the trash facility.250.00 per one hundred pounds and mainly depends on the condition and type of metal. Kingston.3 years (4 months) 21Means Repair and Remodeling Cost Data 15th Annual Edition. This will result in a total disposal cost of $76. MA. 130 .000. R.000) / ($125. It is estimated that 500 yd3 of rubbish will need to be removed. Assuming the worst price to allow for improvements. The loading and hauling will cost $46.50 /100 lb.) Payback Period = 0. The savings for salvaged scrap metal is the amount of money that can be collected from the salvage of the machinery in the warehouse.50 to $4. The simple payback period can be calculated with the following equation: Payback Period = (Implementation Cost) / ACS = ($38.400 /yr.
24 Re-arrange Equipment Layout to Reduce Labor Costs Assessment Recommendation Summary Estimated Cost Savings = $135. The automated machines can package cups from two production lines at once and are used where the same product is manufactured on two adjacent lines. where the ordered volume of cups doesn’t merit the use of two simultaneous production lines. takes approximately 6 hours (on average). Both manual and automated packing machines are used to package finished products (cups). one operator is used for each type of packing machine and there are four production shifts per week.Assessment Recommendation No. aside from the packing machines the only difference between production lines for different products are the molds and the process set-up (timing.038 Simple Payback Period = less than one month Existing Practice and Observation Part of the existing floor layout is shown in Figure 1. two operators are required. According to management. The manual machines are only capable of packaging product from one line at a time and are used on the lower volume cup lines. This will require four complete production line changeovers and the movement and setup of one automatic packing machine and two manual packers. placing the two automatic packaging machines side by side. This will allow one operator (instead of two) to monitor both machines.). etc. Presently.000/yr Estimated Implementation Cost = $5.. The operators on the two automatic packing machines were observed to be underutilized. 131 . A full product changeover. Recommended Action Re-arrange the production equipment as shown in Figure 2. spending well over half of their time waiting for something to do. . including the process set-up. Since these machines are presently located at least 50 feet apart.
Q.C.Molds Molds Unscrambler Unscrambler Q.C. Manual Packer Manual Packer Finished Goods Finished Goods Molds Molds Unscrambler Unscrambler Q. Automated Packer Q.C.C. One Worker Can Manage Both Machines Finished Goods Molds Molds Unscrambler Unscrambler Q. Automated Packer Q. Automated Packer Q. >50% idle time Finished Goods Molds Molds Unscrambler Unscrambler Q.C.C.C. Finished Goods Molds Molds Unscrambler Unscrambler Q. Manual Packer Manual Packer Finished Goods Finished Goods Figure 2: Proposed Process Flow / Floor Layout 132 .C. Q.C.C.C.C. >50% idle time Finished Goods Figure 1: Existing Process Flow / Floor Layout Molds Molds Unscrambler Unscrambler Q. Automated Packer Q.
038 Simple Payback = $5.) x (4 chg.000/yr Implementation Implementation of this recommendation will require: In-house Labor 4 technicians/changeover (@ $19.75/hr incl.75/hr $326 Total Implementation Cost $5.038 / ($135.50/hr $440 Moving Equipment / Operators (1 day) Laborers 2 @ $32. @ $27. 133 .000/yr/operator) x (1.Anticipated Savings The equipment re-arrangement will reduce the labor requirements for the packaging operation by one person per shift for 4 shifts: Cost Savings = (1 operator/shift) x (4 shifts) x ($25.35 fringe) Cost Savings = $135.350 Trades Electrician 16 hr.47/hr) x (6 hr/chg.000/yr) = less than one month Note: Labor values taken from Means Repair & Remodeling Cost Data.) = $1.869 Plant Foreman (5 days) (@ $33. fringe) = $1.47/hr incl. fringe) 6 hours/changeover 4 changeovers are required (4) x ($19. 15th Annual Edition.00/hr $512 Hydraulic Crane (25 ton) @ $541/day $541 Equipment Operator (Crane) @ $40.
cooked with steam and starches.790/yr Estimated Implementation Cost = $6343 Simple Payback Period = 2 months Existing Practice and Observation The process of manufacturing cereal feeds is divided into two lines each running in the same direction in the facility. These bins are then moved by forklift truck to the beginning of the second line. where other ingredients such as minerals and vitamins are added. extruded. 25 Re-arrange Equipment Layout to Reduce Handling Costs Assessment Recommendation Summary Estimated Cost Savings = $4. and loaded into bins. In the first line. milled.056/yr Estimated Additional Income = $44. mixed. dried.Assessment Recommendation No. the grains are weighed. packaged and moved to shipping. ground. pelletizers drying cooling packaging and shipping move product by forklift mill extruder weigh hoppers silo silos Figure 1: Existing Process Flow / Floor Layout 134 . The product is then pelletized.
Since there are loading doors on both ends of the facility.00/hr) x (1.896/yr 135 .902/yr @ 10% profit = $44.056/yr Increased Production =(7200 tons/yr) / (2000 hrs/yr) x 208 hrs/yr = 749 tons/yr Increased Sales = 749 tons/yr x $598/ton = $447. x 1 hr/60 min. x 10 times/day x 250 days/yr = 208 hrs/yr Labor Saved = (208 hrs/yr) x ($15.30 fringe) = $4. Each movement of the product takes 5 minutes. packaging and shipping pelletizers cooling drying mill extruder weigh hoppers silo silos Figure 2: Proposed Process Flow / Floor Layout Anticipated Savings The product is moved 10 times each day (one shift).790/yr Total = $48. Re-arrangement of the equipment will save: 5 min. eliminating the need to move the product by fork-lift.Recommended Action Re-arrange the production equipment into a continuous line and install a conveyor system to deliver in-process materials from the weigh hoppers to the dryer. it is recommended that this move be made during that time. Since your company has a planned shutdown for one week. little or no inconvenience will be caused by moving the location of the shipping operations.
15th Annual Edition.00/yd 3 = $350 Rubbish 20 yd3 @ $30.00/yd 3 = $600 Moving Equipment / Operators Laborers 2 @ $32.740 / $48.972 Helpers 2 @ 18.45 yrs (approx.65/hr $1.00/hr $1. @ $27.75/hr $978 Total Implementation Cost $70.Implementation Implementation of this recommendation will require : Conveyor System (installed) $60.50/hr $440 Plumber 16 hr.60/hr $1.740 Simple Payback = $70.488 Plant Foreman @ ($25/hr + $7.896/yr = 1.300 Trash Removal Construction 10 yd3 @ $35.000 Trades Electrician 16 hr.536 Hydraulic Crane (25 ton) @ $541/day $1.50/hr fringe) $1. 17 months) Note: Labor values taken from Means Repair & Remodeling Cost Data. 136 . @ $28.30/hr $453 Laborers (40 hr) Skilled 2 @ $24.623 Equipment Operator (Crane) @ $40.